Oil prices experienced significant volatility this week, with West Texas Intermediate (WTI) crude fluctuating between gains and losses. After a 5.17% decline on Monday, WTI crude rebounded to $95.8 per barrel on Tuesday, while Brent crude, which fell 2.85% the previous day, reached $102.8 per barrel, according to data from Trading Economics.
The price swings followed a period of escalation in the Middle East, as tensions eased somewhat after the United States and Israel curtailed large-scale strikes against Iranian targets. Iran also ceased attacks on oil refineries and gas plants, explained Arturo Vásquez, director of Research at Gerens and former Deputy Minister of Energy.
But, crude oil prices rose again on Tuesday after Iran intensified its attacks on key energy infrastructure in the Middle East, and allies of the United States did not respond to a call from President Donald Trump to reopen the Strait of Ormuz. The Strait of Ormuz is a strategically vital waterway, with roughly 20% of the world’s oil supply passing through it daily, raising concerns about a potential global energy crisis.
Despite the release of 172 million barrels from U.S. Strategic petroleum reserves and an additional 400 million barrels from the International Energy Agency, Erick García, former Director General of Hydrocarbons at Peru’s Ministry of Energy and Mines (Minem), anticipates that prices could moderate but doubts a return to pre-crisis levels of around $67 per barrel. He cautioned that any price decline “would be premature” to anticipate a sustained downward trend.
“With Trump’s announcement —that the conflict was being contained— the price fell to $84 a barrel and then rose again […] We would have to wait until the conclude of the week to confirm a true trend,” García noted.
The blockage of Ormuz, through which around 20% of the world’s oil passes each day, threatens to unleash a global energy crisis. (EFE/ Tasnim News)
Felipe Cantuarias, president of the Peruvian Society of Hydrocarbons (SPH), stated that price movements in Peru are primarily driven by external factors. “The prices of fuels in Peru are directly linked to the behavior of the international oil market and its derivatives. The variations we observe locally are mainly due to external factors, such as geopolitical tensions, production decisions by exporting countries, or changes in global demand,” he explained.
In the short term, he added, the market could continue to experience fluctuations due to the sensitivity of the oil sector to such events. However, if international conditions stabilize, prices could also present greater stability. This volatility underscores the interconnectedness of global energy markets and the potential for rapid price shifts.
García believes that crude oil prices would need to fall to around $70 per barrel to notice a reduction at the local level, particularly given the current period of strong speculation in the market.
Climate factors are also presenting a challenge, according to Vásquez. Strong waves have prevented several ships from discharging fuel, including not only oil but also derivatives such as gasoline and LPG. This situation has also hindered a reduction in the price of the latter in the Lima market.
“The replenishment of fuels will take time as the logistics chain still needs to be reorganized. Plants first have to recover their inventories —in some cases almost exhausted— and then dispatch progressively. The strong waves of recent days have prevented the discharge of several ships,” he explained regarding the import of various types of fuel.
Adding to this, Peru is highly dependent on the international market. According to Cantuarias, domestic production is insufficient to cover internal demand. “Today we produce around 40,000 barrels per day, while the country consumes nearly 290,000 barrels per day in liquid fuels. That means we depend largely on imports, so any change in international prices ends up directly impacting the local market,” he warned.
LPG prices could remain high for more than a week. Currently, a gallon in Lima reaches S/18, while in other regions such as Arequipa the maximum price is barely S/10, according to the Osinergmin Facilito platform.
Vásquez specified that the waves prevented the discharge of a ship with 14,000 tons of LPG. However, importers have scheduled the transport of about 30,000 tons for April.
“I think this will be resolved in the next 15 days or within a month, because imports have already been scheduled and the Pisco plant is starting to produce normally,” he said.
LPG supply depends on Pisco while waves block unloading in Callao. (Photo: Andina)
The import process is prolonged, he explained, because the world is facing a refining shortage due to the war in Ukraine and the increase in fuel demand in the northern hemisphere during the winter.
García maintains that, as the logistical problem generated by the deflagration is resolved, prices in Lima will tend to normalize.
“We will see the price issue soon, when the supply is regularized, and I believe the supply will normalize this week,” he affirmed.
