With the signing of a memorandum of understanding (MOU) for peace between the United States and Iran, Middle Eastern oil producers are hastening their efforts to resume production and exports.
According to Bloomberg on June 19, U.S. and Iranian officials have begun implementing the peace MOU, and shipping traffic through the Hormuz Strait is expected to gradually increase. The Hormuz Strait is a crucial passage for global crude oil and liquefied natural gas (LNG) shipments. Following the conflict, maritime blockades and movement restrictions had disrupted energy exports from the region.
Major oil-producing countries, including Saudi Arabia, the United Arab Emirates (UAE), and Iraq, are preparing to increase their previously reduced production and shipping volumes. Bloomberg reported that “key oil-producing nations like Saudi Arabia and the UAE are confident in a relatively swift recovery.”
Iraq is also preparing to resume normal operations at its oil fields. According to the Iraqi state news agency, Iraqi Oil Minister Basim Mohammed stated, “Our oil fields are ready to resume production,” adding that “the return to normal production levels will be gradual.” The Iraqi state oil marketing company, SOMO, is reportedly in discussions with clients regarding vessel allocations.
However, even with the reopening of the strait, it may take time for energy flows to return to previous levels. Mines in the sea need to be cleared, and safe shipping routes must be confirmed. Additionally, there is a need to reposition tankers and reduce elevated insurance costs reflecting the potential for renewed conflict. Repairs to damaged refineries and pipelines must also be undertaken.
Challenges such as a shortage of vessels and high transportation costs remain. Tankers that avoided the Gulf region during the conflict have either moved to other routes or are in a standby status, necessitating a large-scale repositioning to restore the supply network. Bloomberg noted that “the cost of chartering large tankers may remain elevated while uncertainties persist.”
The market impact is expected to be felt first in Asia. Asian refiners, including those in Japan and Vietnam, have a high dependence on Middle Eastern crude oil and have been significantly affected by supply disruptions and price increases. Stabilization of maritime transport could alleviate procurement burdens for these countries.
In the commodities market, there are forecasts that international oil prices could decline further if supply shocks are alleviated. However, the need to replenish reduced stockpiles and the possibility of disruptions in peace negotiations may limit the extent of any price decrease.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.