Trump’s TACO. Who won?

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, gave a wide-ranging interview to the Neft and Capital Internet portal about the possible consequences for the global oil market from the temporary truce in the Middle East.

— "Nick": Alexey, the main question now is what do you think will happen in two weeks after the end of the two-week truce?

— Everything here will depend on what really happens in these two weeks. It is quite obvious that Iran's purely negotiated terms, despite the fact that they are taken by the United States as a basis, will not be accepted.

But there are obvious results for the world and the oil and gas market: the fact that Iran and now Oman retain the right to charge fees for safe passage through the Strait of Hormuz. We are facing a new geopolitical reality: we used to know that fees were charged for passage through the canals — the Panama Canal, the Suez Canal — but now there is an unexpected precedent for charging fees for passage through the strait. And this new reality for the oil and gas market will lead to a significant increase in the cost of ship chartering.

The second thing I would pay attention to is that oil prices will calm down somewhat and stop rushing towards more than $100 per barrel again.

And further price dynamics will depend on how effective the new scheme of ships passage through the Strait of Hormuz will be. Will it be possible to restore traffic to pre-war levels? So far, we see that traffic has been reduced by more than 90%.

— "Nick": Do you think it's possible that Iran will restore its production, sanctions will be lifted from the country, and Iranian oil will flood the market, further lowering prices?

— For Iran, the issue of lifting US and Israeli sanctions is really fundamental. I assume that there is a possibility of such a development, because the Americans need to bring down oil prices in the near future. And one of these tools, of course, is the lifting of sanctions on at least Iranian oil exports.

However, even if this happens, I would not say that Iran will instantly fill the market with cheap oil. It should be understood that Iran, even during the sanctions period, provided almost without any restrictions the supply of its oil to only one buyer, China. Now, if the sanctions are lifted, the list of buyers can be expanded. Therefore, I do not expect any significant inflow of oil from Iran to world markets.