Oil price could double: expert explains threat of Strait of Hormuz blockade

Blocking the Strait of Hormuz could lead to the worst-case scenario for the global energy market. Iran is effectively blocking a third of the world’s oil supplies, threatening a sharp jump in oil prices – to $100–120 per barrel. This, in turn, will hit consumers, stock and currency markets, and will only strengthen Russia’s position.

Leonid Kosyanchuk, President of the Association of Petroleum Product Market Operators, CEO of SunOil network, told UNN about this.

Details

In conjunction with US and Israeli strikes, the closing of the Romanian strait is a development of events according to the worst-case scenario for the world’s energy market.

He explained that Iran is a powerful oil state that had “approximately 20% of world oil exports.” And almost a third of the world’s oil passes through the Strait of Hormuz, and its closure will cause panic on stock markets and on the oil exchange.

He predicts that this will lead to a large imbalance between supply and demand in the oil market. The price of oil will rise due to changes in the cost of delivering this oil. If the strait is blocked, the consequences will not be long in coming.

I think that in the nearest future, literally tomorrow or the day after tomorrow, we will see that futures will grow very quickly. They react not only to such significant events, but even to some statements by state leaders

According to the expert, if the strait is blocked, not only futures but also physical prices will rise. And this increase can be extremely significant.

Today, no one will tell you specific figures. Although, approximately, I can say that the price of oil, and not only futures, but also the physical price, can rise to 100 to 120 dollars per barrel. And this is a disaster for our consumer. Because if in Europe, for example, a consumer spends from 5% to 12% of his earnings on gasoline, fuel, then here it is more than 50%. I think the Ukrainian oil product market will feel it by the end of the month. And then it will be even worse

He also added that these events could be reflected in the currency markets, meaning they could cause significant fluctuations.

I think that the currency will not be as stable as it has been so far. Frankly speaking, it is difficult to imagine a worse scenario for the development of events in the eastern region

In turn, Russia will only benefit from such a development of events, if, as Kosyanchuk notes, “toothless United States will continue to drag on sanctions against Russia’s shadow fleet.” In addition, according to him, China and India, where “these supplies of Russian oil are directed,” will also benefit.

And accordingly, there is a difference between $50 per barrel and $100-120, you understand? That is, Russia will be in the black, accordingly

At the same time, energy expert Hennadiy Riabtsev insists that Iran will not be able to realize its threat to close the strait.

In the short term, quotes will rise. After all, this message is an excellent reason for exchange speculators to play on the upside. However, as it becomes clear to market participants that the Iranian threat cannot be realized, quotes will go down again

AdditionThe Iranian parliament approved the closure of the Strait of Hormuz. Now the final decision must be made by the Supreme National Security Council of Iran. The decision to close the strait, through which about 20% of the world’s oil and gas demand passes, is not yet final.