Oil prices fell sharply after President Trump announced a cease-fire with Iran on Tuesday evening, but little has changed on the ground for energy producers in the Persian Gulf.
For one, Iran continued to attack targets across the Arabian Peninsula on Wednesday while Israel struck Lebanon, casting doubt on the durability of the two-week truce. And mariners remained wary of passing through the Strait of Hormuz, the waterway that connects the Gulf to world markets.
Until tankers start moving, the region’s oil and gas companies are unlikely to start reopening the taps.
“Who’s going to be comfortable moving ships when drones and missiles are still being fired around the region?” said Helima Croft, an energy analyst at RBC Capital Markets. “The mechanics of this reopening are going to be messy.”
The first step to getting energy flowing again will be for the full tankers that have been stuck in the Persian Gulf to travel through the narrow waterway on Iran’s southern coast. If they are able to do so, they will bring much needed fuel to buyers in Asia and elsewhere and send a powerful signal to other shipowners and energy producers to attempt similar voyages.
“You’re going to need to see tankers going on a regular basis through the strait to build the confidence for tankers to enter the strait,” said Jason Bordoff, the founding director of the Center on Global Energy Policy at Columbia University. “They’re not going to want to get caught on the other side of this again.”
Next, once empty vessels start traveling into the Persian Gulf, producers will look to drain the energy storage tanks that have filled up in the weeks since Feb. 28, when the United States and Israel began attacking Iran.
That will free up space for companies to start turning wells back on. Estimates suggest at least 10 percent of the world’s oil supply has been turned off since the war started, analysts have estimated. Some of those wells most likely will restart easily, but not all of them.
Getting the broader region back to something akin to normal production will be a monthslong endeavor that involves stabilizing the pressure in underground oil reservoirs, as well as making repairs to dozens of damaged energy sites.
“It’s not just as simple as turning a valve and things magically go back to pre-conflict levels,” said Noah Barrett, an energy analyst for investment firm Janus Henderson Investors.
Rebecca F. Elliott covers energy for The Times.
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