As tensions between the United States and Iran escalate, uncertainty surrounding oil supply in the Hormuz Strait is increasing. While the immediate risk of supply disruptions is low, concerns are growing that if instability in the Middle East deepens, securing supplies and managing prices could become challenging after September.
On July 13, the Ministry of Trade, Industry and Energy reported that Deputy Minister Moon Sin-hak held an emergency meeting with officials from the Korea National Oil Corporation, the Korea Petroleum Association, and the oil and shipping industries to assess the current oil supply situation. This meeting follows Iran's recent declaration to re-block the Hormuz Strait and attacks on passing vessels, coupled with U.S. airstrikes against Iran.
The government currently views the domestic supply situation as stable. The oil imports secured by the refining industry for July and August are more than double those of the same period last year, alleviating short-term supply concerns.
However, international oil prices are under renewed upward pressure, with prices rising by over 3% on the day. Only six vessels passed through the Hormuz Strait recently, marking the lowest number in five weeks.
The critical period will be after September, when new contracts and shipments are expected, as opposed to the already contracted July and August supplies. There is a time lag from contract to shipment, transportation, and customs clearance. If disruptions in the Strait continue, competition among countries and refiners for alternative oil supplies may intensify. Even if supplies can be secured, rising freight and insurance costs could increase import prices.
The International Energy Agency (IEA) has projected a rapid recovery in oil demand as summer progresses. In the second quarter of this year, global oil demand fell by 4.8 million barrels per day compared to the same period last year. However, demand has shown signs of recovery since hitting a low in May. In contrast, global refinery utilization rates last month decreased by 6 million barrels per day compared to a year ago, with delays in the restart of Middle Eastern export refineries.
Concerns about inventory levels are also present. In June, global oil inventories increased by 21 million barrels, thanks to a rise in maritime stocks, marking the first increase in four months. However, inventories in OECD member countries fell by 62 million barrels, of which 44 million barrels were from government stock releases. Although total inventory figures have increased, the readily available land stocks and strategic reserves continue to decline.
As a result, there are worries that a renewed supply shock from the Middle East could weaken the market's buffer capacity. Particularly, if summer travel demand rebounds while refinery operations face disruptions, volatility in prices for crude oil as well as gasoline and diesel could increase.
The government plans to establish a real-time communication system with the industry to monitor the situation in the Middle East and the status of tanker passages, while also exploring options for securing alternative supplies. Deputy Minister Moon stated, "The government and the refining and shipping industries must communicate closely to ensure there is no disruption to the public's daily life, and we will thoroughly monitor supply trends. We aim to diversify oil import sources and fundamentally improve the oil industry's resilience to establish energy security that can withstand any crisis."
* This article has been translated by AI.
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