US Ceasefire to Help Ease LPG, LNG Supplies to India in Short Term

The two-week ceasefire declared by the US President Donald Trump is expected to help ease supplies of LPG and LNG to India, even as it will take months for crude oil and refined product flows to normalize.

Besides, the development is bearish for crude oil and product prices in the short term.

Top government officials said that it seems Iran is still in control of the Strait of Hormuz (SoH) with permission being given by the Islamic Revolutionary Guard Corps (IRGC).

Lloyd’s List Editor-in-Chief Richard Meade in an article on Wednesday said that a temporary US-Iran ceasefire has prompted shipowners to prepare rapid departures from the Middle East Gulf (MEG), where more than 800 vessels have been stranded since late February, but key terms of the truce and transit protocols remain unclear.

Prashant Vasisht, Senior VP & Co-Group Head of Corporate Ratings at ICRA, said “The announcement of ceasefire in West Asia provides much needed relief to the domestic oil and gas sector given the high reliance on West Asia for supplies. While crude and product flows may take months to normalize, some supplies would start for crude oil and petroleum products like naphtha, LPG, thereby alleviating the immediate shortage.”

Additionally, with the prospect of supplies recommencing from the Strait of Hormuz (SoH), crude oil and LPG prices have eased thereby reducing the pressure on marketing margins and LPG under recoveries of oil marketing companies, he added.

Apart from crude oil, natural gas supplies are urgently needed for sectors such as fertilizers, however supplies may take weeks to commence, apart from stranded cargoes. Nevertheless, prospects of supply commencing would ease pressure on prices of natural gas and fertilizer inputs which would reduce the fertilizer subsidy burden for GoI, Vasisht explained.

“However, sustenance of ceasefire and resumption of traffic through Strait of Hormuz would remain key monitorables for oil and gas markets to normalize,” he emphasized.

Lloyd’s List said that transits were still being negotiated on a case-by-case basis as of Tuesday (April 7), however it remains unclear whether that system will now be amended in light of the tentative two-week ceasefire.

Under the current system, each vessel seeking clearance to move through the strait has been required to submit a formal request via the vessel’s agent in Iran.

Shipowners are then required to provide documentation on ownership, management, financing, insurance, trading history of the vessel and charterer contracts to prove that the vessel has no US or Israel affiliation.

US President Donald Trump’s announcement late April 7 of a two-week ceasefire with Iran is BEARISH for near-term oil prices as it removes the immediate threat of military escalation as per S&P Global Energy.