TMany people wonder, after a possible end to the war in the Middle East, how long it will take to return to normal life in terms of crossing the Strait of Hormuz? In its latest weekly report, Gibson Shipbroker said: “The Iranian conflict is now in its twelfth week, and the prospect of an agreement leading to normalization in the Middle East appears dim. Despite seeing some progress in the number of tankers crossing the Strait of Hormuz, compared to pre-war levels, flows of oil and products remain in flux, as Iran and the United States compete for control. Several conditions must be met before pre-war traffic resumes; security if these conditions are met, and such an agreement is reached.” Comprehensive agreement between Iran and the United States (as well as Israel and the Gulf Cooperation Council countries), so what will be the timetable for the resumption of Gulf exports from the Middle East?
According to Gibson, “Initially, there is likely to be some residual reluctance to transit the Strait, and only those with high risks may commit. Such crossings may occur along tried and tested post-war routes past the Iranian or Omani coasts, particularly if uncertainty remains about potential mine locations. At the time of writing, there are 157 major tankers in excess of 25,000 DWT stationed within the Middle East Gulf, of which 123 are loaded and will attempt to exit quickly, where more than 150 dwt in the Gulf of Oman immediately and will be able to sail and anchor to lift cargo in short order. Freight rates will be high and volatile initially, decreasing as ships enter the Gulf. The degree of port congestion may be confirmed to decrease at this stage, as loading schedules at the port are redefined. Differences in the readiness of export infrastructure as well as port operations will present themselves. Latest reports indicate that port operations are in place at most ports within the Gulf, indicating that this factor will be a minor impediment to the resumption of exports.
“Rapid liquidation of crude oil inventories should lead to higher volumes available for export. The IEA estimates that countries such as the UAE and Saudi Arabia with more resilient supply chains and greater levels of inventory should be able to maintain high levels of exports within weeks to months. Saudi Arabia may gradually reduce flows on the East-West Pipeline to reduce inefficiencies and improve export economics. Likewise, the UAE may return flows via the Habshan to Fujairah pipeline to pre-war levels. Qatari operations are relatively lower In Iraq, despite repeated assurances from the Oil Ministry that exports could be restored to pre-war levels within a week, port congestion, limited stockpiles and reliance on international operators are likely to significantly hamper a return to pre-war exports. Kuwait and Bahrain face similar problems due to a lack of local operators and the provision of equipment, and the most pessimistic observers suggest that full oil flows from the region will not return for a long time. “In the meantime, it is possible that Saudi Arabia will use surplus capacity to boost,” Gibson added. Exports will increase significantly and help offset losses elsewhere.”
Source: Gibson Shipbrokers Limited
Meanwhile, “on the CPP side, there remains a great deal of uncertainty when it comes to restoring refining operations and consequent intra-Gulf CPP exports. Several refineries, including Ras Tanura and Ruwais, are operating normally. On the other hand, repairing damage at Sitra, Mina al-Ahmadi and SATORP is expected to take longer and timelines are unclear. With this in mind, near-pre-war CPP exports are likely to lag behind oil flows and take a long time to complete.” Until 2027 to re-establish it.”
“Another consideration is long-term tonnage availability. Tanker supply is still adjusting to the new normal, suggesting that it could take months for the ship situation to return to normal. Many more ships are now being stationed in the West, largely due to record volumes of both crude oil and products coming from the US Gulf. The tanker market will have to react and adapt as operations resume, with uncertainty over export volumes on both the dirty and clean side complicating operational decisions,” the shipbroker noted. West-based ships are likely to react immediately and reposition efficiently following the start of the normalization process weeks away in the Gulf, and are unlikely to commit an expensive ballast without paying a cargo to cover the eastbound leg.
“In general, the path towards the resumption of trade through the Strait of Hormuz is fraught with uncertainty, even in a scenario in which a comprehensive agreement is reached and all basic requirements for the resumption of trade are met. At this point, it is difficult to envision this scenario, and a gradual resumption may offer a more realistic outlook. Indeed, a complete return to the pre-war status quo looks increasingly likely by the day, as structural changes occur on both the supply and demand side. Moreover, it will take longer before the affected refineries and petrochemical plants are able to Activity is ramping up again, with clear lead times and supply chains needed to resume normal operations. The recovery sequence is likely to favor crude oil tankers over product tankers, with heavy reliance on volumes in the Middle East. However, inefficiency and insecurity around cargo availability will remain a significant driver of volatility in tanker markets in any scenario,” concluded Gibson.
Nikos Rousanoglou, Global Hellenic Shipping News
