KUCHING: Even if the Strait of Hormuz reopens immediately and oil prices stabilise at between USD80 and USD100 (approx. RM320-RM400) per barrel, global energy markets could take up to 18 months to return to normal, according to economist, Geoffrey Williams.
The Williams Business Consultancy Sdn Bhd’s founder and director said the biggest challenge facing the market is rebuilding supply chains amid exceptionally low global inventories.
“The main concern is not so much the price of oil but the physical stocks.
“Inventories are at record low levels globally and finding supplies is increasingly difficult even if the price premium can be accommodated,” he said.
Williams said disruptions at the Strait of Hormuz remain the key risk to oil markets following the recent Middle East conflict.
Should disruptions continue, oil prices could surge to between USD120 (approx. RM484) and USD150 (approx. RM605) per barrel, he warned.
He said oil prices have gone through three distinct phases this year, beginning with a 15 per cent rise between January and late February as geopolitical tensions intensified.
The outbreak of military conflict then pushed prices up by as much as 80 per cent, with markets fearing widespread damage to oil infrastructure.
Prices later retreated by about one-third after the April 8 ceasefire announcement as concerns over a broader regional conflict eased.
While most oil infrastructure remains intact, Williams said exports continue to be affected by restrictions at the Strait of Hormuz.
He noted that emergency measures, including the release of 400 million barrels from inventories by the International Energy Agency (IEA), have helped cushion the impact on markets.
However, crude shipments still require five to six weeks to reach Europe and Asia, while some facilities may need up to six months to resume full operations.
“As a result, it could take 12 to 18 months before markets return to normal conditions,” he said.
Williams added that abundant global reserves and the potential return of Venezuelan crude should support long-term supply, although periods of volatility are likely to remain a feature of oil markets.
