When will oil prices soar above $100 again

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, gave a wide-ranging interview to the Internet portal “URA.RU” about the prospects for further growth in world oil prices after the breakdown of the peace settlement between the United States and Iran.

— What will happen to oil prices if the conflict between the United States and Iran escalates?

— It all depends on the further development of the situation. If the blockade of Iranian ports and blocking the Strait of Hormuz continues, this will have an impact on prices. And even more so if the Houthis implement their threats, which mean not only possible attacks on ships passing through the Bab el-Mandeb Strait connecting the Red Sea with the Arabian Sea, but also a danger to the port of Yambu, through which the main supplies of Saudi oil go bypassing the Strait of Hormuz.

If there is evidence of specific cases of successful attacks by Yemen on Saudi Arabia's infrastructure, this will be a serious boost to prices.

Iran's systematic shutdown of the United Arab Emirates' oil loading facilities in the Fujairah region may be another incentive for oil prices to rise. This is a port that is located outside the Persian Gulf. Due to it, by the end of June, the UAE increased oil production above its pre-conflict levels.

— The United States is considering a new package of anti-Russian sanctions, which provides for 100% duties for energy buyers from Russia. Will this measure remain relevant for them, given that the Strait of Hormuz has been closed again, and the threat of oil shortages has reappeared?

— I would say that this is absolutely not the right time. As Vasily Ivanovich said in an anecdote, "it's not up to mushrooms now, Petka." Yes, buyers of Russian oil listen to the US sanctions more than to the measures taken by the European Union and the United Kingdom. But that is why, if Washington takes such a step, it will dramatically worsen the situation on the global oil market, and this will not play in its favor. So, from my point of view, there is very little chance that the United States will promote this bill in one form or another.

This does not mean that they will forget about these sanctions. They will simply postpone and will not resort to this tool until the situation with Iran stabilizes. In general, such "draconian" initiatives are part of the American sanctions policy in principle.

— What is happening and will happen with the discount on Russian oil against this background?

— Firstly, Urals quotes will rise following the general global oil prices. And secondly, the discount rate will gradually decrease as the sale of the oil from Iran and the Persian Gulf countries, which has already passed through the Strait of Hormuz and has not yet reached the buyers. This will happen in the coming weeks: I think all these raw materials will be sold by the end of July, and then Russian oil will become much more in demand. Unless, of course, the escalation of the conflict between the United States and Iran continues, and the strait remains closed.