Russell: The oil industry in Asia wants Trump to abandon the Gulf but doesn't expect him to do so.

Asia's crude-oil industry knows how to solve the crisis caused by the Iran conflict. But they know that their wish will not be granted, and are bracing themselves for a prolonged disruption of?supplies? from the Middle East.

The APPEC Conference in Singapore this week was awash with thousands of conversations about how to safely and sustainably reopen?the Strait of Hormuz.

The answer was consistent.

U.S. president Donald Trump should 'back down and leave the Gulf Region to allow countries in the region to clean up the mess caused when the U.S. attacked Iran on 28 February.

There was widespread agreement that a resolution to the conflict is not likely.

Before the start of the aerial bombing, almost 20% of the world's crude oil, refined products and liquefied gas moved through the narrow waterway connecting the Persian Gulf to the Gulf of Oman.

The volume of oil exports dropped to almost zero after the beginning of the conflict, as Tehran threatened to attack ships attempting to transit. While they have recovered a bit, they remain well below pre-war levels.

There is disagreement over how much oil passes through the Strait of Hormuz, and whether any additional volume has been diverted to other ports outside the Gulf in the Middle East.

Even the most optimistic figures are only around 75% of the pre-war levels. This means that the global market has lost about 5,000,000 barrels of refined and crude fuels every day.

It is hard to argue with figures that show Asia's imports are almost?30% or 2 million bpd below the pre-conflict level, indicating the true crisis is the lack of refined products.

Initial expectations were that the conflict between Iran and the oil and gas industry would be resolved in a matter weeks or months.

This optimism has evaporated, and APPEC delegates - including Middle East oil producers and traders, as well as shippers, refiners and shipping houses - now discuss how to navigate a long disruption.

It is believed that the conflict can be resolved with a political accord, but it is unlikely because it has morphed into an ego war.

Trump is seen as being unwilling to accept anything other than a victory he can call his own. The same goes for the hardline leaders of Iran, who are determined to maintain their influence on the Strait of Hormuz, as well as get billions of dollar to repair the damage caused by the bombings.

One delegate said in a conversation, "We need political settlement but that will require regime change in Washington and Tehran." The answer to the question about where the change will most likely occur was Washington. This is a common view among APPEC delegates.

It could take up to two and a half years for Trump's tenure to end, but the pressure could increase if the Democrats were able retake one or both houses of Congress during the midterm elections in November.

The worst is now the best.

The oil industry hopes for the worst-case scenario.

The strait is still a risky and constrained area for crude oil and other products, and there are occasional disruptions from missiles and drones.

This'scenario' shows that Asia can get enough crude despite the fact that the Middle East, and Russia, have lost their refining capacities due to the Ukrainian attacks.

The market is also less focused on the price of crude oil, as it's reflected in Brent futures. Instead, the focus is more on the size of the discounts offered for barrels within the Strait of Hormuz versus the premiums charged for barrels that are outside the Strait of Hormuz.

The discount must be large enough to cover insurance costs that have risen from 5 U.S. Cents per barrel pre-conflict, to $2.50 today, as well as the increased freight cost of $30 a barrel, from $6.

The sharp increase in insurance and shipping costs has led to a crude oil price that is below the actual cost of securing shipments.

The industry did not want to discuss worst-case scenarios, such as widespread destruction of civilian and energy infrastructure across the Gulf.

They still do not believe that this will ever happen. Six months ago, they also thought that the war would end soon.

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These are the views of the columnist, an author for.

(source: Reuters)