Resumption of Physical Oil Supply Could Take Much Longer After US-Iran Deal: Rystad

Global physical supply of crude oil could take up to eight weeks to return to pre-conflict levels amid growing optimism over a new U.S.-Iran deal allowing shipping traffic to resume through the Strait of Hormuz, Rystad Energy said Wednesday.

Under an optimistic scenario involving a 30-day phased reopening of the strait, meaningful volume recovery would happen as early as June, with processing port arrivals lagging by an additional four to six weeks after that, Rystad said in a note.

The Oslo-based energy consultant said it takes time for the shipping market to reprice transit insurance and verify vessel operators and their access as shipowners gradually regain their confidence.

Rystad estimates a six-to-eight-week lag between credible access conditions in the strait and the normalization of oil flows in physical markets, citing the structure of how shipping markets operate.

Iran and the U.S. are working mediators on a one-page framework to restart negotiations aimed at ending the conflict and opening the strait, with talks potentially beginning next week in Islamabad, the Wall Street Journal reported Wednesday.

June West Texas Intermediate and July Brent futures finished $7-9/bbl lower on Wednesday following news of the possible peace deal.

Rystad said global physical flows could return to 80%-90% of pre-disruption levels in July following the possible deal to resume access in the strait.

“The price impact of a deal is being felt immediately in futures. The physical market will take considerably longer to agree,” the consultant said.

Reporting by Frank Tang, ftang@opisnet.com; Editing by Michael Kelly, mkelly@opisnet.com