Oil Renaissance: what does the Middle East war resumption mean for Russia

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to Forbes on the impact of the Middle East renewed war on the Russian oil industry prospects.

The truce between Iran and the United States has been reduced to zero for today: the parties hastened to declare success, but in fact they did not agree on fundamental issues, Alexey Gromov says.

When the United States lifted the blockade on Iran's ports on June 18 and granted it an export license on June 22, it seemed that Tehran would be able to sell the maximum amount of oil, and an oversupply would form on the market, the expert recalls. But on July 7, the license was revoked, and the blockade of seaports was restored on July 14. Iran will no longer be able to export its oil, and the United States is unlikely to be able to protect ships of other countries in the Strait of Hormuz, which belongs to the territorial waters of Oman.

"It looks like the window of opportunity for Iran is closing, — Gromov says. — For how long, no one knows now. It is expected that in the coming weeks those 60-70 million barrels of Iranian oil that have already left the strait and are heading to buyers or are looking for them will be sold."

According to him, the situation on the oil market may return to what it was before the truce in April-May, and if the conflict continues, oil prices may rise above $90 per barrel in a week. It could be worse: the strategic and commercial reserves allocated by the International Energy Agency (IEA) to stop price increases have been used up, and the countries that provided them have not yet been able to replenish their storage facilities.

What will happen to Russian exports

Gromov believes that no further export growth is expected until all Russian oil in the sea is sold off. In addition, he adds, production that is not growing will not allow a rapid increase in oil supplies.

Drastic changes in production in the coming months should not be expected, Gromov says. Vertically integrated oil companies are in no hurry to invest in it, firstly, because they fear that the investments will not pay off, and secondly, they now have another headache - putting oil refining in order, and this requires significant funds, he notes.