-- After the ceasefire between the US, Israel, and Iran this week, a recovery in oil and gas flows through the Middle East is still a long way off, with plenty of steps and processes that could last months, according to a report by commodity analysts at Wood Mackenzie.
The report said that 11 million barrels per day of upstream oil production remains shut in, meaning they are not currently operational, even as the underlying capacity remains intact. This cannot be restored until export routes normalize and vessel traffic resumes at scale.
In order to bring these barrels back to market, "A 'workable system' of transit and shipowner confidence in the security of the transiting vessels is essential," said Alan Gelder, SVP Refining, Chemicals and Oil Markets at Wood Mackenzie.
Gelder added that facilitating insurance, trade finance and "sustained inbound vessel transits" are key in restoring confidence in the Strait.
He also noted that ballasting vessels, or ships that come in empty to pick up oil, will not be willing to do so, given the risk of getting trapped, if hostilities were to resume once again after the two week ceasefire.
The report noted that as exports begin to ramp-up, storage will help facilitate upstream production and refining to restart activity in full-swing.
However, it noted that not all countries have sufficient storage. As such, Saudi Arabia and the UAE can ramp up output quickly, while Iraq could take six to nine months to return to pre-conflict output levels due to reservoir and operational complexities.
Coming to the global gas markets, the ceasefire may allow trapped LNG cargoes in the Gulf to exit, offering limited near-term relief, according to Wood Mackenzie.
For real structural change in supply, however, Qatar's Ras Laffan LNG facility has to restart its 12 operable trains, according to Tom Marzec-Manser, Europe Gas and LNG analyst at Wood Mackenzie. "It is unclear if QatarEnergy would consider doing this during a ceasefire," he said.
The firm estimates that even if restart efforts begin in early May, full restoration of all 12 trains could take until the end of August, while damaged capacity at the South site may remain offline for years.
Meanwhile, disruptions to domestic gas infrastructure in the UAE could further complicate regional supply dynamics, Marzec-Manser said.
He warned that "sustained disruption at Habshan," Abu Dhabi's gas processing facility, could significantly tighten domestic gas availability, potentially forcing the UAE to cut reinjection volumes or even ramp up imports via the Dolphin pipeline system.