"I'm scared to fill up"... When will oil prices finally fall?

According to The Financial News, the ceasefire between the United States of America (US) and Iran has eased some of the geopolitical risks coming from the Middle East, but oil prices remain elevated. Experts predict that even if the war ends immediately, the era of high oil prices will persist for some time.

According to Investing.com on the 10th, June delivery Brent Crude Oil on the Intercontinental Exchange futures market in London closed at 95.92 dollars per barrel on the 9th local time, up 1.17 dollars, or 1.23%, from the previous session. May delivery West Texas Intermediate crude oil (WTI) on the New York Mercantile Exchange (NYMEX) finished at 97.87 dollars per barrel, a rise of 3.46 dollars, or 3.66%.
After the ceasefire agreement between the US and Iran, international oil prices have stopped surging and are catching their breath in the 90‐dollar‐per‐barrel range. Ahead of US President Donald John Trump’s final ultimatum deadline, prices based on WTI had soared to 117 dollars per barrel. However, once news broke of a two‐week ceasefire between the two countries, prices plunged about 28% from their peak and briefly fell to around 91 dollars.
Jeon Gyu-yeon, a researcher at Hana Securities, noted, "Even after the ceasefire, various frictions continue, and only about three ships have passed through the Strait of Hormuz. Still, expectations that the blockade of the strait could be lifted are driving oil prices lower."
However, experts analyze that current traffic through the Strait of Hormuz is only about 5–10% of normal levels, leading to transport disruptions of 18 to 19 million barrels per day. The Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE) are operating alternative pipelines and maintaining daily supplies of roughly 4.7 million and 1.9 million barrels, respectively, but this is far from enough to offset the overall shortfall.
Hong Sung-gi, a researcher at LS Securities, explained, "Even after factoring in the release of strategic reserves and the easing of sanctions, the actual supply disruption is estimated at around 10 to 11 million barrels per day." Researcher Jeon Gyu-yeon added, "The crude oil supply shortfall caused by the United States–Iran War is roughly equivalent to about 10% of global demand."

Because it will take considerable physical time to truly restore supply chains and normalize production, oil prices are unlikely to stabilize immediately. After the fighting stops, restarting small oil fields typically requires two to three weeks, while large fields need four to five weeks, and the time needed to repair damaged infrastructure must also be taken into account.
Researcher Hong Sung-gi projected, "Even if a complete peace agreement is reached two weeks from now, it will take at least three months for transport disruptions in the Strait of Hormuz to be resolved," adding, "It will likely take three to six months for oil prices to settle back into the 70‐dollar range."
Researcher Jeon Gyu-yeon also remarked, "For a pullback in oil prices, the key factor is not how far they have risen, but whether supply returns to normal," and added, "Looking at past cases, it has typically taken one to four months to resolve supply shortages."
Experts differed on the exact timing of a return to pre‐war oil price levels. Hong Sung-gi predicted, "If a peace agreement is reached, oil prices will likely plunge in the short term to around 85–90 dollars, then move into the 70‐dollar range over the following three to six months."
By contrast, Jeon Gyu-yeon argued, "Because crude oil supply disruptions will continue for the time being, high prices in the 80–90‐dollar‐per‐barrel range could persist," and forecast that oil prices would not clearly return to pre‐war levels until around the fourth quarter of this year. This outlook is somewhat more conservative than Hong’s projection of three to six months, or roughly by the third quarter.
Key variables for stabilizing the market include how quickly oil‐producing countries restore output, how long it takes for the Strait of Hormuz to return to normal, and the pace at which US shale companies increase production. Hong focused on the speed of crude output recovery by the Organization of the Petroleum Exporting Countries (OPEC) and the normalization timeline for the Strait of Hormuz, while Jeon placed greater emphasis on the production ramp‐up by US shale firms.
Jeon stated, "US shale companies are highly likely to gradually increase production on expectations of improved business conditions after the war, and the expansion of output by non‐OPEC countries such as Brazil and Guyana will partially offset the supply disruptions."
fair@fnnews.com Han Young-jun Reporter