Despite the US ‘peace’ with Iran, fuel prices may not fall — Politico
This is according to Politico.
The market reacted immediately to Trump’s statement on peace – oil and gas prices fell to their lowest level since early March. The price of the benchmark Brent crude fell below 80 euros per barrel. This was immediately felt at petrol stations across Europe and Ukraine.
However, experts say it is too early to celebrate. Research firm Kpler notes that, due to the conflict, the global market is short of 12 million barrels of oil every day. Even in an ideal scenario, this shortfall will only be reduced to 2.6 million barrels a day by the end of August. A full resumption of supplies from Iraq and Kuwait is not expected until December at the earliest.
Experts remain sceptical. Daniel Kral, chief economist at Oxford Economics, emphasises that the fall in prices has so far been limited.
“We are still a long way from emerging from the crisis,” he said.
One of the main problems remains the physical safety of tankers. Following the February attacks, Iran has mined vast sections of the Strait of Hormuz. Clearing the mines will take time.
Experts say that clearing the waters could take anywhere from a few weeks to half a year. Until the sea is safe, insurance companies will keep premiums high. This is automatically factored into the final price of the commodity.
“In this respect, today’s market reaction seems too good to be true,” noted Carsten Brzeski of ING Bank.
In his view, the optimism is based solely on the fact that this is the first agreement Tehran has officially confirmed following Donald Trump’s numerous statements.
Potential tariffs are holding oil prices back
Kpler conducted a survey among tanker owners. The results are disappointing:
- Most shipowners do not want to enter the Strait if new tariffs are imposed.
- There are currently 118 loaded tankers stranded in the Gulf.
- Their departure will be a one-off event rather than a steady flow.
- The pace of traffic recovery will be half as fast as it was before the war.
And what about gas prices?
Even if oil flows steadily, the situation with natural gas is more complicated. Europe is entering into fierce competition with Asia for liquefied natural gas (LNG).
Reasons for the competition:
- Damaged infrastructure, the repair of which will take years.
- The EU’s urgent need to replenish stocks before winter.
- The El Niño weather phenomenon, which will force Asia to buy more gas to cool homes in the summer.
- China’s return to the market as an active buyer to replenish its own reserves.
This means that gas prices could quickly recover from their recent fall. Experts predict that any rise in temperatures or industrial growth in Asia will force Europe to overpay to secure supplies. A peace deal removes the threat of attacks but does not eliminate the global energy shortage, the article concludes.
What is known about the situation on the oil market
We have already reported that, due to the uncertain state of affairs between the US and Iran, several hundred vessels are waiting in the Persian Gulf, fearing further attacks from Iran – and this is not the only reason.
Despite the bottleneck in the Strait of Hormuz, global oil prices have begun to fall, on an optimistic note. Brent crude futures fell by $4.08, or 4.7 per cent, to $83.25 per barrel, whilst US West Texas Intermediate crude fell by $4.35, or 5.1 per cent, to $80.53.
As a reminder, on 16 June, Iranian vessels began passing through the US naval blockade in the Strait of Hormuz.
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