As tensions between the U.S., Israel, and Iran have eased, global oil prices are on a downward trend. However, analysts predict that volatility will remain high in the near term. The outcome of Israeli Prime Minister Benjamin Netanyahu’s visit to the U.S., scheduled for Tuesday, is expected to be a key factor in determining the direction of international oil prices.
The roller-coaster ride of global oil prices is causing turbulence not only in the oil refining industry but also in the aviation and shipping sectors. Industry experts are particularly alarmed by the rapid decline in global oil inventories, which could potentially trigger supply shortages.
According to Opinet, the oil price information service of the Korea National Oil Corporation, domestic gasoline and diesel prices fell for three consecutive days following U.S. President Donald Trump’s order to halt additional airstrikes against Iran on July 24.
On July 24, the average retail prices for gasoline and diesel were 1,871.05 KRW (1.29 USD) and 1,855.78 KRW (1.28 USD) per liter, respectively. Prices continued to drop on July 25, with gasoline and diesel decreasing by about 0.03% and 0.06%. By June 26, they had fallen to 1,869.90 KRW (1.29 USD) and 1,854.32 KRW (1.28 USD), marking the lowest levels in about four months since March 29.
Global oil prices also hit their lowest point in ten days. On Monday, Brent crude futures plummeted by 8.42 USD (8.7%), closing at 88.36 USD per barrel, the lowest closing price since July 17. West Texas Intermediate (WTI) futures also dropped by 6.70 USD (7.5%), finishing at 82.61 USD per barrel, the lowest since July 16.
The oil refining industry sees Benjamin Netanyahu’s visit to the U.S. on June 27-28 as a potential game-changer. During his meeting with President Trump on Tuesday, Netanyahu is expected to focus on military options and negotiation strategies regarding Iran. The outcome of this meeting is likely to set the course for international oil prices.
Industry insiders warn that if the conflict escalates, a global oil supply crisis could emerge in the latter half of the year.
The International Financial Center reports that global oil inventories are rapidly depleting. Before the conflict, inventories stood at 8.2 billion barrels, but this figure has dropped to around 7.5 billion barrels by the end of May. While there’s still enough oil for over 70 days of consumption, the unprecedented speed of inventory depletion since March is raising red flags.
Oh Jung-seok, head of the Comprehensive Planning and Analysis Division at the International Financial Center, stated that at the current pace, the market fears an inventory crisis may be unavoidable in the second half of the year. He added that the inventory reduction issues are more severe in emerging markets, particularly in Asia, compared to developed countries.
Iran’s second blockade of the Strait of Hormuz threatens not only the strait itself but also alternative routes like the Red Sea, further complicating oil supply logistics.
An industry insider remarked that the international oil market’s wild swings are making supply planning incredibly challenging. Warnings about both price volatility and dwindling inventories are adding layers of complexity to an already difficult situation.
Earlier this month, an Iranian attack on a U.S. vessel derailed a peace memorandum of understanding (MOU) between the U.S. and Iran, prompting Iran to initiate a second blockade of the Strait of Hormuz. The Houthi rebels also declared a blockade of the Red Sea, causing a significant decrease in vessel traffic through the Bab-el-Mandeb Strait. Following the MOU, international oil prices had fallen to around 60 USD but surged back to the 90-100 USD range after the second blockade.
While South Korea has secured its crude oil imports at normal levels until September, calls for proactive measures are growing louder amid rising uncertainties.
The Ministry of Trade, Industry and Energy reports that crude oil imports for July and August are over 110% of last year’s levels, while September imports are projected to be around 90% of last year’s figures. However, many experts believe that even if a peace agreement is reached between the U.S. and Iran, it could take months for the Strait of Hormuz to return to normal operations. This makes inventory issues a major threat to the global oil market in the second half of the year.
Yang Ki-wook, head of the Industrial Resource Security Office at the Ministry of Trade, Industry and Energy, stated in a briefing on July 24 that given the current supply situation, the likelihood of sounding a crisis alert in the near term is low. It’s closely monitoring the situation regarding the Red Sea routes and supply conditions on a daily basis.
