New Delhi: Hopes for a normalisation of the situation have risen following the interim agreement between the US and Iran, and the Strait of Hormuz is set to open. Its imminent opening could see millions of barrels of crude oil, currently stranded in the Middle East, reach global markets, thereby impacting oil prices. According to Mu Shu, an analyst at energy data firm Kpler, the opening of the Strait of Hormuz could release approximately 93 million barrels of non-Iranian crude oil—currently stuck in the Persian Gulf—into the market.
Furthermore, if US sanctions are eased, approximately 72 million barrels of Iranian crude oil—currently held in tankers—could also enter the market. This would boost oil supplies across the globe, including in Asia. Meanwhile, international news agencies have reported that Iran is preparing to ramp up its oil exports. Reports indicate that three of its oil tankers have already passed through the Strait of Hormuz this week.
US President Donald Trump and Iranian President Masoud Pezeshkian have digitally signed a 14-point agreement aimed at ending the conflict. Iran’s Foreign Ministry has stated that the agreement has come into effect immediately.
Will Oil Supplies Actually Start Flowing Immediately?
While the full opening of the Strait of Hormuz is likely to increase oil supplies, many Asian refiners have already booked oil cargoes scheduled for delivery between June and August. Additionally, several refineries in China are set to shut down for maintenance in July; consequently, demand for the extra oil may remain limited for the time being.
According to the consultancy firm Energy Aspects, over 1.8 million barrels per day of refining capacity in China will be temporarily offline in July. Private companies will account for a capacity of approximately 1.2 million barrels per day within this.
Will Oil Prices Drop Once The Strait of Hormuz Opens?
According to a Singapore-based oil trader, many oil sellers might have to lower prices further to boost demand after the Strait of Hormuz reopens. Some companies are still holding unsold oil cargoes.
A South Korean industry official stated that refinery profits are expected to remain weak in the second half of the year. Consequently, the market is no longer driven by a scramble to secure specific types of oil; instead, the real competition centers on price and economic viability.
Despite this, Asian refiners are preparing for increased supplies from the Middle East. This shift is expected to reduce Asia’s reliance on oil imports from the United States and other regions.
(With agency inputs)
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