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Oil prices have reached a five-month summit over the weekend after the United States struck Iran’s nuclear facilities. Tehran retaliated with an attack on the Udeid American air base in Qatar, keeping the global energy market on the edge.
But oil prices fell sharply on Tuesday after it appeared that Iran has held other attacks for the moment, in particular by avoiding closing the Hormuz Strait, a critical strangulation point in world trade.
Brent Crude, the international benchmark for oil prices, has dropped more than 5.6% so far in the negotiation day and is currently negotiated at around $ 66 per barrel.
Strait of the closure of Hormuz always a concern
One of the most important potential economic measures of potential reprisals in Iran would be Stop the Hormuz Strait.
The narrow navigable track is a key transit route for 20% of the world’s oil supply, as well as a wider commercial corridor between Europe and Asia.
While the Iranian Parliament supported a proposal to close the Strait, the final decision lies in the country’s supreme national security council.
Iran has made similar threats to the past, especially in 2018 during the first term of US President Donald Trump after the United States withdrew from the Iranian nuclear agreement negotiated under former President Barack Obama.
A closure could involve placing sea mines through the Strait – which, at its narrowest point, represents only 33 kilometers (21 miles) wide – and even attack or capture ships. No later than March, the revolution goalkeeper seized ships whom he accused of passing diesel. Similar tactics were used during the Iran-Iraq war in the 1980s.
The closure of the strait would send a shock via the world markets, although analysts think that there is enough spare capacity to blunt the immediate impact. However, the risk of additional volatility remains high, reflecting the disturbances of the energy market observed in 2022 after the invasion of Ukraine by Russia.
HSBC analysts claim that crude oil prices could exceed $ 80 a barrel if the strait is closed. Goldman Sachs plans that it could be $ 110.
But the strike of the American air base in Qatar in fact calmed the world markets, because it suggested that economic reprisals are not at the forefront of the Arsenal de Tehran.
“If Iran was serious about reprisals, it would flow an oil tanker in the Strait of Hormuz. The fact that this does not do this means that it folds the knee,” said Robin Brooks, principal researcher at Brookings Institution, in a job On the social media platform X.
Flux
Apart from the conflict, the oil market was already in a moment of flow. In May, OPEC agreed to increase the production of 41,000 barrels per day for the month of July, part of the decision to relax the voluntary production reductions after the request crashed during the cocovid pandemic.
There are other ways to alleviate the impact of a supply shortage.
The OPEC +replacement production capacity, mainly in Saudi Arabia and the United Arab Emirates, could quickly add around 2.5 million barrels per day to the market, with up to five million available in the longer term, according to the analysis of Third Bridge Capital.
This could buy time if there is a blow on global oil supplies before it ultimately affects consumers at the petrol pump.
Iran produces 4% of the global oil supply, most of which go to China due to the world’s world sanctions against Iranian oil.
“It is difficult to see in the current environment how Iran would grow more barrels on the market, because a large part of their supply ends up going to China,” Al Jazeera McNally, a global manager of the world and the world sector in Third Bridge Capital, told Al Jazeera.
China buys almost 90% of Iran’s oil exports, totaling around 1.6 million barrels per day. China is already struggling with American prices and any increase in energy prices will harm its economy, explains Abigail Hall Blanco, professor of economics at the University of Tampa.
“The oil markets are incredibly interconnected. And therefore if the price of oil in the world takes place following a closure or restriction of oil tankers via the Strait, then you would certainly see these impacts on the United States and other markets,” Hall Blanco told Al Jazeera.
Earlier this morning, Trump said that China can continue to buy Iranian oil, reporting a change in American policy because Trump has so far been to end Iranian oil exports. He also imposed sanctions related to Iran on several of the independent “tea” refineries of China and port operators for Iranian oil purchases, reported the Reuters news agency.
Meanwhile, regional producers are preparing for any fallout. Iraq’s state oil company has started to evacuate foreign staff, fearing Iranian reprisals against American forces stationed in the region.
Western companies also take precautions. BP, which is associated with the Iraqi Basra operation in the Massive Rumaila oil field – with an average of 3.32 million barrels per day – reduced its staff on site. However, the company says that production will not be affected. At 3 p.m. in New York (7:00 p.m. GMT), BP actions dropped by 1.4%.
Apart from OPEC +, producers like Brazil, Canada, Guyana and the United States could increase production to help fill any supply difference. But with the exception of the United States and Canada, the other countries take longer to make these movements, experts said.
“The difference with everyone except the United States is only its longest delivery time. “But as in the longer term, the non -OPEC offer will continue to respond to most of demand for demand in the future.”
Over the past decade, non-OPEC countries have considerably increased production, a trend that should continue. Energy Information Administration (EIA) projected in December (Pdf) that 90% of the growth in oil production this year will come from non -OPEC sources.
The United States also has a strategic oil reserve at its disposal which currently contains 402.5 million barrels. The reserve is intended to be exploited in moments of drop in production due to global emergencies.
Although the United States produces more oil than any other country in the world, at current levels, it will cost $ 20 billion and several years to complete the strategic reserve.
A political risk for Trump
Trump on Monday on Truth Social said in All-Caps: “Everyone, keep oil prices, I look.”
Trump campaigned on reducing daily goods prices. But its trade policies and volatile rates have increased prices upwards. In the report of the most recent consumer price index, a key measure that the central bank uses to measure the inflation rate, food prices increased by 2.9% compared to the period last year.
But oil remained a key force for Trump administration, the lowering prices, including a 12% drop in gas prices compared to the period last year.
But that could change very quickly because prices fluctuate.
“It’s just that it’s a fluid situation,” said McNally.
