IMF assesses timeframe for oil market recovery

Restoring normal oil supply volumes from the Middle East will take two to three months even if shipping through the Strait of Hormuz is fully restored, according to a new analytical note published on the International Monetary Fund's (IMF) blog.

"Industry estimates suggest it will take two to three months before a significant share of oil flows can resume following a full reopening of the waterway. A longer-term concern is that prolonged production halts could cause permanent output losses, especially where financing to restart wells is scarce," the report said.

What cushioned the initial blow this time is that energy markets had room to maneuver and absorb it, the IMF said.

"As tensions flare again in the Strait of Hormuz, that room is now smaller and shrinking further as spare capacity has been deployed, demand has compressed, and inventories have been drawn down," the report reads.

It was stressed that significant efforts are still critically needed to increase the resilience and diversification of energy supply and prevent oil shocks from destabilizing the global economy.

"Why didn’t prices climb higher? The answer is that a combination of factors helped cushion the initial blow. But much of that room has now been used up," the IMF said.