Petroleum analyst says positive developments in Middle East could lead to drop in gas prices

A petroleum analyst said gas prices could drop quickly if positive developments emerge in the Middle East, but he warned that the situation remains very volatile.

The conflict in Iran has seen the crucial Strait of Hormuz closed to tanker traffic, resulting in a spike in gas prices that’s already being felt at the pumps in Saskatchewan. But markets are already reacting to the possibility that the blockade might soon come to an end.

Read more:

• US will hold off on Iran power plant strikes for 5 days, extending Trump deadline on Hormuz strait
• Analyst says gas prices could settle down but things remain unpredictable
• Iran threatens world tourism sites and says it is still building missiles 3 weeks into war

Patrick De Haan, the head of petroleum analysis for the gas price tracking app, GasBuddy, said news this week of potential negotiations between Iran and the United States is already pushing oil prices lower.

“The potential that this could be an improvement (is) sending oil prices down nearly 10 per cent this morning, so that could start to bring lower prices so long as the situation doesn’t change again by mid-to-late week,” De Haan explained.

“Iran has denied the talks, so it’s a little bit difficult to make heads or tails of what’s developing here, but I think there’s enough information that there seem to be talks occurring.”

But, De Haan noted, the messages coming from Iran and America aren’t exactly lining up. Iran has denied that talks are occurring, but he said there appears to be enough evidence to prompt a market reaction.

“Oil markets are trying to stay ahead of these potentials, and that’s why gasoline prices and oil prices are swinging wildly – because of the change in the perception and anticipation of supply and demand. The market is hoping that these talks will lead to the resumption of the flow of oil, globally,” De Haan said.

“If there’s a remarkable change and a de-escalation on both sides, it could lead to a dramatic and sustained loss in the price of oil. If there’s conflicting information, the oil market is going to try and sort out what is accurate and what is inaccurate, and we could see another period of volatility.”

De Haan said the energy markets tend to react to the news of the day, and with the potential for positive news in the Iran war also comes the potential for a drop in gas prices.

“It looks – for now – like the next move in the days ahead could be a decrease in prices, but these types of situations tend to be extremely volatile and next-to-impossible to predict what the next move may be,” the analyst explained.

“This is literally a live situation where the market is trying to digest and sort out how this is going to impact the flow of oil.”

Asked why some gas stations appear to be increasing prices more than others, De Haan noted just how quickly fuel prices have been changing in recent days.

“Some stations are in different places as the energy markets have remained quite volatile and prices have been changing at the wholesale level on a daily basis,” he said.

–with files from 980 CJME’s Abby Zieverink