Oil prices will soar if Cyclone Gonu halts shipping through the Strait of Hormuz, the route for about a quarter of world crude supplies, but its impact will be temporary if oil facilities remain intact, experts said on Wednesday.
Most oil and gas exports from the Gulf region, amounting to between 17 and 20 million barrels a day, pass through the strait between Oman and Iran, making it the world's most important oil passage.
"If shipping is halted through Hormuz, I think there is going to be a panic in world oil markets and prices could shoot to as high as $80, but of course for a very short period," Kuwaiti oil expert Kamel al-Harami said.
Cyclone Gonu, the strongest tropical storm to hit the region in decades, lashed Oman with heavy rains and winds on Wednesday, as thousands were evacuated from low-lying areas there and in Iran.
No serious impact
"Asian markets are going to be the most affected because they don't have strategic reserves and they heavily depend on Gulf oil," Harami told AFP.
A majority of oil exports from Opec kingpin Saudi Arabia and Iraq, as well as all exports from Iran, Kuwait, the United Arab Emirates and Qatar pass through the strait.
But there has been no indication so far of any disruption to maritime activities in the strait, according to transport officials in Oman.
About two-thirds of Gulf oil exports go to Japan, South Korea, China, in addition to India and Pakistan.
Leading Kuwaiti economist Jassem al-Saadun downplayed any far-reaching consequences of Cyclone Gonu on world markets if oil installations remain intact.
"The cyclone is not expected to have any serious impact on oil supplies as the world can cope with some interruption for one or two days," Saadun, the head of Al-Shall Economic Consultants, told AFP.
Impact 'minimal'
"If the cyclone does not hit and destroy onshore and offshore oil facilities in Gulf countries, its impact on the world market will be minimal."
There will however be an initial psychological reaction if shipping is halted through the Strait of Hormuz, causing some rise in the oil prices, Saadun said.
Oil prices rose on Monday on the emergence of Cyclone Gonu but subsided on Tuesday as fears about the impact of the tropical storm eased. They were firmer in Asian trade early on Wednesday as attention turned to the release of US economic figures.
Brent North Sea crude for July rose 32 cents to $70.77.
Harami said the impact of the cyclone on the oil market will be stronger if it continues for several more days which could force the United States and the International Energy Agency to release some reserves to cool prices.
Source : business.iafrica.com
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