Baku, Azerbaijan, Aug.1
By Leman Zeynalova – Trend:
If supplies via the Strait of Hormuz were cut off, existing stocks would be rapidly depleted, Alan Gelder, Vice-President for refining and chemicals at Wood Mackenzie research and consulting company told Trend.
“The reduction of Iranian exports from the global crude oil markets results in a tighter global supply/demand balance for crude oil, so oil prices are higher than they otherwise would be. Also, the seizing of oil tankers in the Persian Gulf has increased the costs of insurance for vessels taking crude oil from the Middle East to global (primarily Asian) markets,” said Gelder.
He noted that the oil market is closely monitoring developments in the Straits of Hormuz and the responses of the various governments. Clearly tensions need to be eased, but in the interim, the UK government is seeking support to ensure oil tankers can move freely within the Persian Gulf, added Gelder.
“The Straits of Hormuz is so important as it is the key export route for crude and LNG supplies from the Middle East to global markets. If the supplies were cut off, existing stocks would be rapidly depleted, resulting in a rapid increase in energy prices. Spare liquid productive capacity is limited to around 2 million b/d in OPEC with much of it in countries that use the Straits of Hormuz leaving a post of that unavailable in the event of a shutdown of the Straits,” he noted.
Ann-Louise Hittle, Vice-President for Macro Oils at Wood Mackenzie, pointed out that the tension has arisen from a combination of factors, but they can be simplified into separate actions by the US and the UK.
“The US withdrew from the JPCOA, which was an agreement to restrict Iran’s ability to develop nuclear weapons. The withdrawal was to enable the US to re-impose economic sanctions, which would incentivise Iran to accept more onerous terms on its nuclear program and restrict its ballistic missiles. These sanctions are hitting the Iranian economy, as its ability to export crude has been reduced,” she said.
Separately, the UK seized a tanker carrying Iranian crude oil when it was near Gibraltar, as the UK believed the oil was to be supplied to Syria in contravention of EU sanctions, Hittle continued.
“The Iranians dispute this claim and have seized a UK tanker that was sailing in the Persian Gulf. There has been a build-up of naval/military in the Persian Gulf, which is leading to greater tension in the region. This tension is unlikely to ease until the parties concerned start direct negotiations,” she added.
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