Middle Eastern countries, especially Saudi Arabia, Turkey, and Pakistan, met with Iranian officials in Tehran on Monday to discuss the framework for regional security and reduce tensions. This comes as Iranian President Mohammad Reza Pahlavi has expressed his willingness to resolve regional disputes.
Impact of Sanctions on Negotiations
Iran continues to emphasize the need to address U.S. sanctions and the blockage of Iranian ports, and this issue will be a prerequisite for broader negotiations to begin. Reports indicate that Standard Chartered Bank predicts a valid agreement could quickly reduce some of the geopolitical risks in the oil market, but prices will remain high until the security of transportation routes is ensured and supply returns from the Gulf.
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While Saudi and Iranian officials were discussing in Tehran, Yemen's Ansar Allah (Houthis) announced new attacks on the pumping stations of the East-West pipeline in Saudi Arabia. However, there is still no confirmed evidence of new damage to this pipeline or disruption of oil flow.
Impact of Oil Prices on the Global Market
Given this situation, Standard Chartered Bank predicts that crude oil prices will remain high in the coming months, especially as the recovery of supply in the Gulf will be the main factor balancing the market. The bank also notes that the revival of some crude oil exports has alleviated immediate shortages, but disrupted production, limited refining activities, and costly transportation options continue to restrict effective supply.
Refined products, especially diesel, carry the highest risk, and the shortage of diesel and transportation costs are driving inflation in the market beyond the oil market. Diplomacy may reduce some of the risks, but secure movement of tankers in the Gulf and the return of oil barrels to the market are needed for sustainable price reductions.
Various countries have drawn from their emergency oil reserves to cover existing shortages, and replenishing these reserves in the coming months will increase oil demand. According to the latest data from the U.S. Energy Information Administration (EIA), the country's strategic oil reserves have fallen to just 282.7 million barrels, the lowest level since 1982.
Additionally, major Asian countries have also drawn from their strategic and commercial reserves to compensate for supply shortages from the Gulf. Standard Chartered Bank predicts that replenishing these reserves will absorb a significant portion of returning barrels, especially if governments act to purchase before production and transportation from the Gulf resumes.
This situation means that less oil will remain for rebuilding commercial inventories, which could keep prices high even if tensions decrease.
