Energy supply chains may take months to recover from recent disruptions despite a peace agreement and the reopening of the Strait of Hormuz, as shipping, production and export operations gradually return to normal, Argus Media analysts said Monday.
Vessel owners, operators and insurers will likely wait for evidence of sustained "successful transits" before returning to the waterway, slowing the recovery in commodity flows, Francis Osborne, head of oil analytics at Argus, said.
Shipping companies must reposition vessels and crews, while producers across the Middle East Gulf need time to restore damaged export infrastructure and output capacity, Osborne said.
Argus Consulting's Oil Fundamentals Outlook assumes that regional crude production will take four to six months to return to near pre-crisis levels, while some facilities may require significant remediation beforehand.
Osborne added that alternative export routes through Saudi Arabia's Yanbu and the UAE's Fujairah may continue handling elevated volumes, keeping Hormuz shipments below pre-war levels even after reopening.
Some traditional buyers of Middle East crude may diversify their supply sources following the disruption, although demand for inventory replenishment could partially offset weaker traffic through the strait, Osborne said.
Refined product markets remain "cautious" despite the prospect of a peace agreement, with Europe, Africa and Asia still waiting for normal supply flows to resume, Benedict George, head of refined product pricing at Argus, said.
Europe continues to await jet fuel and diesel cargoes, while Asian buyers seek crude, naphtha and liquefied petroleum gas supplies, and African markets remain focused on diesel and gasoline imports, with "no immediate relief for physical supply in Europe," according to George.
If Hormuz remains open under a peace settlement, refined product shipments to key consuming regions could normalize within six weeks, although immediate relief remains unlikely.
Tankers require four to six weeks to reach Europe, and many vessels continue using the Cape of Good Hope route to reduce exposure to Houthi violence, George said.
George added that the disruption has created a "lasting gap in commercial oil products stocks in Europe," leaving the market more vulnerable to future supply disruptions.
Jet fuel premiums have fallen back to pre-war levels, with the July swap trading about $65 per metric ton above July ICE (ICE) gasoil on Monday, Argus head of EMEA jet fuel pricing Amaar Khan said.
Strong refinery production, inventory drawdowns and imports from the US and Nigeria have strengthened confidence that supply will satisfy summer demand, Khan added.
Market participants appeared relatively calm because traders had already "priced in" the possibility of a peace agreement, although outright fuel prices remain above levels seen before the conflict.
Khan added that additional Middle East jet fuel cargoes are unlikely to reach Europe before late July, although returning supply could ease concerns over "post-summer supply," while heavily depleted inventories are unlikely to be rebuilt quickly because supplies will remain relatively tight.
Liquefied natural gas exports through the Strait of Hormuz still face significant hurdles despite a peace agreement, according to Martin Serior, head of LNG pricing at Argus, and Natasha Fielding, head of LNG and natural gas pricing at Argus.
Qatar's Ras Laffan, the world's largest LNG export facility, may take months to return to full output, while missile strikes have removed 12.8 million metric tons per year of capacity from the 77 mtpa terminal for at least three years.
Prompt spreads between Asian and European gas prices have remained largely unchanged, while delayed expansion projects, storage refill requirements and the risk that conflict could "restart again" continue to support prices above pre-war levels, according to the analysts at Argus Media.
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