A US-Iran Peace Deal May Not Be Enough To Save the Oil Market Now: Here’s Why
HFI Research has acknowledged that the oil market has handed its breaking level, which was projected round mid-April
The evaluation argues that these stock attracts will happen no matter any reopening of the Strait of Hormuz, pushed by structural and logistical constraints. This comes amid notable uncertainty round the diplomatic efforts to resolve the US–Iran warfare.
Why a Peace Deal May Not Reverse the Oil Market Shock
HFI defined that even with a US-Iran peace deal, oil market recovery would be delayed by logistical bottlenecks. An estimated 160 million barrels of floating storage in tankers would start discharging. However, transit and offloading alone would take 30–40 days, with tanker turnaround requiring a further 20 days.
Meanwhile, round 70 very massive crude carriers (VLCCs) en path to load US crude for Asia face a much longer cycle. It would take 6–8 weeks for loading, 45–50 days for transit, and one other 20–25 days to dump and return.
“In complete, we won’t see significant tanker site visitors again in the Strait of Hormuz from this entourage for a minimum of 3 months,” the blog learn.
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Onshore constraints in the Middle East further complicate the restoration. The area holds 600 million barrels in onshore storage. Producers want roughly 200 million barrels drained earlier than they will restart output.
That would take a minimum of 100 VLCC. However, present tanker exercise suggests this rebalancing could not happen till mid-to-late June at the earliest.
“Once the onshore crude storage drains, we’d like a gradual movement of tankers coming to via the Strait of Hormuz to choose up crude. By this level, producers like Saudi, UAE, Kuwait, Qatar, Iraq, and Bahrain can restart. This course of will take a number of extra weeks all however guaranteeing that the lack of provide continues,” HFI Research added.
The report highlighted that cumulative storage misplaced resulting from the closure already totals roughly 1 billion barrels, rising to 1.98 billion by the finish of June.
According to HFI, given the restricted commercially out there crude to offset such losses, the market could require demand destruction to revive equilibrium. If the Strait stays closed past April, oil costs might transfer into uncharted territory, with conventional pricing mechanisms breaking down.
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