Middle East Crude Production Restarts as Strait of Hormuz Reopens, Normalization Expected Within Two Weeks

The Strait of Hormuz has entered the process of reopening following the signing of a memorandum of understanding (MOU) to end the war between the United States and Iran.

Accordingly, the Middle East energy industry is preparing large-scale operations to restart oil fields and normalize exports.

On June 19, local time, Bloomberg News reported that the agreement between the U.S. and Iran served as a signal for oil fields and refineries across the Middle East to resume operations simultaneously.

The media outlet reported that the restart is expected to be on such a massive scale that the immense heat signatures generated from gas flaring will be observable even from satellites orbiting in space.

Patrick Pouyanné, chairman and CEO of France's TotalEnergies, recently appeared before the French parliament and predicted, "Once the strait is opened, the entire market's operations will normalize within the next six months."

The normalization of crude oil supply is expected to have a significant impact on the global economy by lowering energy prices and easing inflationary pressures.

In particular, Bloomberg pointed out that this could provide President Trump with an opportunity to lower domestic fuel prices ahead of the midterm elections in November, while also replenishing the U.S. crude oil reserves, which have depleted to their lowest levels.

During the period of war and subsequent ceasefires, crude oil exports from the Gulf region plummeted to approximately 15 million barrels per day.

This is a 60% plunge compared to February, just before the start of the war.

As a result, international oil prices even surpassed $126 per barrel.

Energy consulting firm Rystad Energy estimated that attacks by Iran during the war caused approximately $42 billion (about 64.6 trillion won) in damage to major energy infrastructure, including refineries and pipelines in the Middle East.

However, key oil-producing nations such as Saudi Arabia and the United Arab Emirates (UAE) are confident that they can quickly restore the flow of crude oil.

Officials from both countries maintain that since they have gradually managed the shutdown of oil fields to maintain pressure since the beginning of the war, they can recover pre-war production rates within two weeks.

Indeed, three Saudi Arabian Very Large Crude Carriers (VLCCs) cleared the way by passing through the Strait of Hormuz on June 18, immediately following the agreement between the U.S. and Iran.

Iraq is also actively preparing for the normal operation of its oil fields.

Iraq's Oil Minister Basim Mohammed said in an interview with the state news agency that Iraqi oil fields are ready to resume production, adding that the return to normal production levels will occur gradually.

He also mentioned that Iraq's state oil marketing company, SOMO, has contacted customers to request that they designate charter vessels and tankers to load Iraqi crude oil cargoes.

However, follow-up measures are essential for the complete normalization of operations in the Strait of Hormuz.

Tanker deployment, oil field restarts, restoration of damaged facilities, and mine clearance operations must be carried out in an integrated manner.

It is estimated that approximately 140 VLCCs will be needed to fully restore crude oil transportation in the Gulf region.

Some brokerage firms reported that tanker charter rates exceed $600,000 (920 million won) per day, which is at least 10 times higher than last year's average.

Once crude oil production resumes in earnest, Asia is expected to be the biggest beneficiary.

Asian refiners, including those in Japan and Vietnam, are reportedly already receiving numerous offers for Middle Eastern crude oil.

During the war, due to the shortage of Middle Eastern crude, some countries took energy-saving measures, such as reducing refinery operations and implementing a four-day workweek.

Commodity market experts believe that once the supply shock is resolved, the market is highly likely to return to a state of oversupply.

Experts predict that if the increase in supply continues, international oil prices, currently at around $79 per barrel, could fall further.

However, the need to replenish reserves depleted during the war is cited as a factor that could limit the extent of the drop in oil prices.

Saad Rahim, chief economist at global commodities firm Trafigura, said, "We need to bring it back up to at least 50% of pre-war volumes in a fairly short period," adding, "Crude producers and refiners will ramp up production as much as possible, as quickly as possible."
※ Please note: This article was translated by AI and may contain errors.