FGE NexantECA, a prominent energy consultancy, anticipates that up to 75% of previous oil flows through the Strait of Hormuz will return by the end of 2024. However, the firm cautions that significantly lower oil prices are not guaranteed for 2027.
This outlook stems from the belief that ongoing tensions between the United States and Iran are unlikely to be resolved soon. Such persistent geopolitical instability could prevent the sustained peace needed for stable, lower oil prices in the medium term. This impacts global energy markets and Ghanaian businesses dependent on oil prices.
Ghana’s economy, like many oil-importing nations, is sensitive to global oil price fluctuations. Higher oil prices can increase the cost of imports and fuel inflation, impacting living standards and business operating costs. The government’s fiscal planning also relies on predictable global commodity prices to manage its budget and energy subsidies.
Fereidun Fesharaki, chairman emeritus of FGE NexantECA, stated, “There will be more conflict, there will be more trouble, this is not the end of the story. This is the beginning of the story.” He told CNBC that a lasting peace deal between the U.S. and Iran appears “impossible to imagine,” defying assumptions of a calmer market. Before the Iran conflict, the consultancy had expected oil prices to range between the upper $50s and low $60s per barrel in the coming year, an outcome now linked to an unlikely peace deal.
Market participants and policymakers will closely monitor developments in the Strait of Hormuz and US-Iran relations. Any escalation or de-escalation of tensions could quickly shift oil price forecasts. The market's reaction will influence strategies for energy procurement, inflation control, and economic growth in Ghana.
Other analysts hold different views. Citigroup forecasts Brent Crude prices could fall to as low as $60 per barrel by year-end due to normalizing traffic through the Strait of Hormuz. Citi analysts believe an agreement to de-escalate tensions will likely materialize, outweighing alternatives for involved parties. Morgan Stanley also cut its oil price forecasts for the next 18 months, anticipating a new supply glut. These differing predictions highlight the uncertainty in the global oil market.
China's role as a major oil consumer further complicates the market outlook. Fesharaki noted that China is currently buying less oil, keeping markets in suspense. This lack of robust demand from China contributes to market uncertainty, even as Iran eyes other Asian buyers for its oil. The interplay of geopolitical risk and demand uncertainty will shape crude oil prices in the coming years.