Oil prices could spike and hit again their peak Iran-war levels at nearly $120 per barrel if a full recovery of vessel traffic through the Strait of Hormuz takes until July, according to JP Morgan.
Despite the ceasefire announced earlier this week, traffic through the critical oil chokepoint remains severely restricted and under supervision and approval by Iran’s Islamic Revolutionary Guard Corps (IRGC).
“The ceasefire has not reopened the Strait of Hormuz, and transit remains tightly controlled,” maritime intelligence firm Windward said on Thursday.
“Transit through the Strait of Hormuz remains restricted, coordinated, and selectively enforced,” the firm said, noting that “There has been no return to open commercial navigation.”
The market hopes that the Iran-U.S. negotiations this weekend could further de-escalate the situation and lead to a faster re-opening of commercial navigation at the Strait of Hormuz.
However, huge risks and uncertainties remain, including whether Iran would be willing to give up the Hormuz leverage in talks.
At any rate, the immediate optimism after the ceasefire that the Strait of Hormuz would quickly reopen to tanker traffic has faded, and analysts have started to calculate the timelines and potential renewed upward pressure on oil prices.
JP Morgan’s analysts said in a Friday note that the market expects half of the normal flows to be restored by May and the traffic to be fully restored by June.
However, “a more gradual resumption to 100% of pre-war levels by July might introduce $15-to-$20-a-barrel upside risk to prices,” JP Morgan’s experts wrote in the note carried by Bloomberg.
Early on Friday, both international benchmarks traded at $95-97 per barrel.
On Thursday, Goldman Sachs analysts warned that Brent Crude is expected to average above $100 per barrel this year if the Strait of Hormuz remains mostly shut to tanker traffic for another month.
By Michael Kern for Oilprice.com
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