While the interim peace deal between Iran and United States has paved the way for increased flow of crude oil globally, there is “cautious optimism” about its effective landing price as risk premiums relating to freight stay elevated and the presently evolving dynamics, according to analysts at S&P Global Energy.

Speaking to The Hindu at the sidelines of a press briefing here Tuesday, Jim Burkhard, Vice President and Head of Research for Oil Markets at S&P Global Energy, “Before the war, oil flowed freely through Hormuz – it will [flow freely] for the next sixty days and after that it is uncertain but it does appear the worst is behind us assuming there is not another flare up of the war – this will help increase in flows and prices not returning to the levels in April.”

Separately on the aspect of shipping of oil, Benjamin Tang, Director and Global Head of Liquid Bulk, Commodities at Sea (CAS) stated freight insurance costs continue to remain elevated and a return to pre-war levels would be potentially gradual.

“The risk premium has stayed elevated, and volumes are still not back [to pre-conflict levels], so suffice to say we are cautiously optimistic, and monitoring the situation,” he stated, adding, “More numbers (transits) need to go up so that we are confident that we are in a fully re-opened state.”

According to Mr. Burkhard, oil flows would begin to approach pre-war levels in the coming months.

About the present situation, in a separate note, Mr. Tang stated that early signs of transit from the broader Gulf region are emerging since the signing of the interim peace deal albeit “gradually”.

In his address, he informed there have been an average of thirty vessel transits a day in the last “seven to eight days”.

Further, the Vice President of Research also emphasised the pricing pressure on crude purchases for India in the post-conflict market would also depend on China’s purchasing behaviour.

“China for the last couple of years has purchased [more oil] than it uses. The key question [therefore] is, will China go back to buying more oil than it consumes or stay at the lower level – if it does the latter, there may not be the pricing pressure,” he said.

Elaborating about the competition in the market, he further observed South Korea and Japan too reduced their purchases in recent months and their behaviour may also bear an impact though China would be the more important factor.

“The countries have reduced their purchases in the recent months. Japan may have started to go back up, and South Korea may as well, but the most important factor is China,” he observed.