Even with Sunday’s announcement of a deal to halt the Iran war and reopen the Strait of Hormuz, elevated oil and gasoline prices — along with broader energy supply disruptions — are not expected to disappear quickly.
Energy analysts say it could be several months before producers and shippers restore operations enough to satisfy global demand. They noted that crude transport and refining move slowly under normal conditions, and ongoing concerns about safe passage through the strait will likely delay any immediate relief.
For more than three months, tankers carrying crude have been stuck in the Persian Gulf, unable to move securely through the narrow channel. Before the conflict, the route handled roughly 20% of the world’s oil and gasoline supply.
“It’s going to take time for people to feel comfortable and for insurance to be in place … particularly to get people on the ground to restart some of these assets,” said Daniel Evans, global head of fuels and refining research at S&P Global Energy.
Even so, oil markets reacted quickly to the news, with prices moving lower early Monday after the agreement was made public.
Brent crude, the global benchmark, fell $3.45 to $83.89 a barrel. In the U.S., benchmark crude dropped $4.03, settling at $80.85 per barrel.
Those prices are still well above the roughly $70 per barrel where oil was trading before the war started.
As the higher prices unwind, ships that have been stranded will have to exit the strait, and then new tankers will have to come in to be loaded, Evans said.
“To bring a ship in, you need to be confident that you’ve got a big enough window of safety to bring it in, load it and move it out,” he added.
Oil tankers also move slowly, he explained. It takes months to travel from the strait to distant countries, deliver the crude oil to a refinery for processing and then arrive at its final destination.
In addition, some producers in the Middle East paused extracting oil from the ground, known as a shut-in, when they ran out of storage space. Restarting those operations can be a slow process.
Countries such as Saudi Arabia and United Arab Emirates, where there are alternate pipelines or routes besides the Strait of Hormuz to deliver oil, may be among the quickest to resume production, said Alan Gelder, senior vice president of refining, chemicals and oil markets at Wood Mackenzie, an analytics firm.
“But places like Iraq could be much more challenged because they’ve had a much bigger shut-in, their fields are more difficult … it may well take about a year before they get back,” he said.
Investment in the energy system, which can take years to see the results, ground to a halt after the strait’s closure, Gelder said. So it will take time for this capital to restart.
Countries that shut in oil production won’t want to restart until they know there is a stable, durable strait, and that a ceasefire will last more than 30 or 60 days, said Daniel Sternoff, senior fellow at the Center on Global Energy Policy at Columbia University.
“We don’t know what open means or what the speed of evacuation of trapped material is going to be,” he said.
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