Oil Price Drop on Global Market Won't Reach Estonian Petrol Stations Soon

News of a possible peace agreement between the US and Iran has pushed oil prices on the global market to their lowest levels since the crisis began in March, but Estonian experts warn that this price decrease will not be reflected at Estonian petrol stations in the near term. According to Alexela's chief, a few cents may drop in the coming days, but no significant price reduction should be expected before September.

News of a possible peace agreement between the US and Iran and the reopening of the Strait of Hormuz has driven oil prices on the global market to their lowest levels since the crisis broke out in March, but Estonian experts emphasize that this relief will reach Estonian petrol stations slowly and only after several months.

Stocks empty, prices fall slowly

Alexela's business development manager Tarmo Kärsna explained that a rapid recovery of prices to February levels will certainly not happen soon. "Stocks are empty and need to be replenished. For global market prices to reach February levels, there is still about 15-20 cents to go. This decline will be slow," said Kärsna.

In the coming days, fuel prices may drop by a few cents, but according to Kärsna, no significant price reduction should be expected before September, and only if a functioning peace agreement is actually reached.

Waiting for peace: agreement still to come

Swedbank macroanalyst Liis Elmik pointed out that oil prices have already fallen significantly in recent weeks in anticipation of the peace agreement. "The peace agreement has been awaited for several weeks and oil prices have responded by falling significantly in recent weeks," she said. If the agreement is signed on Friday, the price decline will likely continue.

However, Elmik stressed that this is only a preliminary agreement and no actual accord has yet been reached. "Apparently the oil price will fall, as the full price decline has not yet been reflected in various indicators," added the analyst.

Strait of Hormuz won't open overnight

Transit expert Raivo Vare is cautious about optimistic expectations. In his view, military operations may be paused for a time, but this does not mean that the Strait of Hormuz will practically open immediately. Currently, approximately 600 ships are waiting to pass through the strait, and resolving this traffic jam alone could take a couple of weeks.

"In addition, a series of conditions need to be met: Iran must be able to start transporting its goods and it must be ensured that negotiations actually proceed and no new attacks occur," explained Vare. He also warned of an additional risk: Iran itself has acknowledged that it cannot control all the mines it has laid, so random mines could endanger ships even after the ceasefire.

Before the conflict that broke out in March, one-fifth of all the world's oil and gas passed through the Strait of Hormuz, so the closure of the strait has had a significant impact on global energy prices.