A deal to end the U.S.-Iran war is constantly talked up, but has yet to materialize. Meanwhile, market reaction doesn’t seem to match “the biggest physical energy disruption in history”, as Helima Croft, Global Head of Commodity Strategy, describes it. At RBC’s Global Energy, Power and Infrastructure Conference, Helima considers the prospects for a deal and what it would take to restore global oil flows once the Strait of Hormuz reopens.
Key Points
• Strong inventories and stockpile releases have so far contained oil prices despite the ongoing Iran conflict.
• The market continues to respond to repeated signals of an imminent end to the war.
• Restoring normal levels of oil flow after the Strait of Hormuz is reopened may take months.
• Issues over Iran’s nuclear program and sanctions relief will be obstacles to a lasting deal.
John Soughan, Assistant Vice President of Global Commodity Strategy and MENA Research, introduces Helima Croft, Global Head of Commodity Strategy, in a session at RBC’s Energy, Power, and Infrastructure Conference.
- Stockpiles limit disruption impact [00:25]
The U.S.-Iran war has created history’s biggest physical energy supply disruption. So far, robust inventories and stockpile releases have provided a buffer, but shortages will become more evident in coming weeks.
- Peace agreement fails to emerge [03:41]
The White House has repeatedly suggested a resolution is imminent. Each time the market responds with a sell-off. But a deal has yet to materialize. The IRGC controls shipping in the Strait of Hormuz and is not anxious to reach an agreement.
- Nuclear issues will impede deal [05:56]
Nuclear capabilities and sanctions relief will be obstacles to any lasting deal. Even when the Strait of Hormuz is reopened, oil flows will be significantly lower than before the war began, because shippers and insurers will be reluctant to use it.
- Oil flows will take months to restore [09:41]
The CEO of ADNOC has indicated it would take four months after reopening to return to 80% of pre-war oil flows.
