Crude oil prices may revisit highs amid US-Iran tensions: Analyst

Global crude oil prices could revisit the highs seen earlier this year if tensions between the United States and Iran continue to escalate, although Asian refiners are now better prepared to deal with supply disruptions than they were at the beginning of the conflict, June Goh, Senior Oil Market Analyst at Sparta Commodities, told ANI.

Crude Price Outlook Amid Escalation

Speaking in an exclusive conversation with ANI on Thursday, Goh said the sustainability of the recent rally in Brent crude, which has climbed back to around USD 80 per barrel, will depend on whether geopolitical tensions continue to intensify. She said the recent exchange of strikes between Iran and the US, along with Washington’s decision to withdraw the 60-day waiver on Iranian oil sales, points to a clear escalation in the conflict. “Unless we see another new MOU signed or a new stance from Trump and also from Iran, I think it’s going to continue for a little while,” she said.

On the outlook for crude prices, Goh refrained from giving a specific price target but said the market remains on an upward trajectory if tensions persist. “We have been here before. It’s almost deja vu in terms of the type of attack that we are seeing. It’s like going back to the start of the war in the early month of March,” she said. She noted that Brent crude had climbed close to USD 110 per barrel during the earlier phase of the conflict before easing, adding that “we cannot discount that whatever we saw at the early part of the year can likely happen again if the tensions continue to escalate.”

Asian Refiners’ Improved Resilience

Despite the renewed tensions, Goh said Asian refiners are in a much stronger position than they were earlier this year. According to her, refiners across Asia have diversified their crude sourcing by increasing imports from countries such as Canada, Venezuela and Mexico, reducing their dependence on Middle Eastern supplies. They have also relied on strategic petroleum reserves to cushion supply disruptions. “Compared to the start of the war, the Asian refiners here have embarked on a series of diversification of crude and they have been very successful in doing that,” she said.

She added that refiners are now better equipped to handle another disruption in Middle Eastern crude supplies and are unlikely to reduce refinery utilisation to the levels seen at the beginning of the crisis. “I do not think that their run rates will drop anywhere near the levels that we saw before at the start of the crisis, the 50 to 60 per cent level. Maybe now they need to tune down from 80 per cent to maybe 70 per cent, but nothing to the severe 50 per cent that we saw before,” she said.

Refined Fuel Markets Under Pressure

However, Goh cautioned that while crude supply management has improved, refined fuel markets remain under pressure due to limited refining capacity and low product inventories. She said diesel and gasoline prices are rising faster than crude because inventories have been drawn down, particularly in Europe and the United States, while refineries are unable to produce enough fuel to meet peak summer demand. “I think that will translate to a higher end-product cost for both diesel and motor gasoline for many players in the market,” she said.

OPEC+ Production and Security Concerns

She also said the recent production hike announced by OPEC+ may not translate into actual supplies if security concerns continue to disrupt tanker movements through the Strait of Hormuz, as shipowners remain cautious about operating in the region.

Impact on India

Commenting on the impact of higher oil prices on India, Goh said rising crude prices, coupled with elevated freight costs, would increase the landed cost of crude imports and could add to inflationary pressures if prices remain elevated. (ANI)

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed.)