Industry experts have informed OPEC+ that supply disruptions caused by the blockade of the Strait of Hormuz are expected to last until the end of this year, even if the waterway reopens swiftly.
According to two anonymous sources present, multiple consultancies and analysts gathered at OPEC's Vienna headquarters for a technical workshop this Monday. The experts cautioned that restoring oil production to pre-conflict levels would take several months.
Prior to its closure, the Strait of Hormuz handled approximately 20% of global oil and gas shipments. It was blocked following the outbreak of conflict between the US-Israel alliance and Iran on February 28th.
The closure has driven up prices for key fuels like gasoline, diesel, and jet fuel, delivering a fresh inflationary shock to consumers.
This assessment aligns with the view of Sultan Al Jaber, CEO of Abu Dhabi National Oil Company, who stated that even if the Iran conflict ended immediately, Middle Eastern oil output would not fully recover before 2027.
OPEC regularly invites analysts to its secretariat to brief officials and delegates from member countries. The sources did not specify which firms commented on the impact of the Strait's closure.
Listed speakers for the technical workshop included S&P Global, FGE NexantECA, Vortexa, Kpler Ltd., and Energy Aspects.
OPEC's Economic Commission, a group of technical experts who analyze market conditions on behalf of ministers, is scheduled to meet on Tuesday.
The ministers themselves are set to convene online on June 7th.
Following the UAE's unexpected departure from OPEC+, the group is highly likely to announce another nominal production increase in June. However, due to the shipping disruptions at the Strait of Hormuz, this increase is effectively difficult to implement.
The uncertainty surrounding US-Iran negotiations continues to unsettle the market, with oil prices stabilizing after recording their largest one-day gain in about a month.
Prices surged on Monday following reports that Iran had paused talks with the US due to Israeli strikes in Lebanon, before paring gains after former US President Donald Trump stated negotiations were still ongoing.
In a report dated May 31, Goldman Sachs reiterated a warning about two-way risks for oil prices, stating that persistent supply reductions in the Middle East present a significant upside price risk, while weak demand poses a considerable downside risk. The bank noted that high prices are suppressing end-user demand more than previously anticipated.
The firm had indicated as early as mid-April that the rationale for a one-way long position on crude was weakening, with prices entering a phase of two-way volatility.
On Tuesday, WTI crude traded near $92 per barrel, following a gain of over 5% the previous session. Brent crude traded just below $95 per barrel, having risen 4.2% in the prior session.
Comments