Brent: Questionable flows, fragile outlook – Commerzbank

Commerzbank’s Commodity Research team, led by Barbara Lambrecht, notes that uncertainty over crude flows through the Strait of Hormuz and conflicting transit data are clouding the outlook for Brent. Upcoming reports from the EIA, IEA and OPEC, plus China’s trade figures, will clarify both supply and demand. The bank highlights that a continued recovery in China’s crude imports would support higher flows and likely cap Brent prices.

Hormuz disruptions and China demand

"The situation in the Strait of Hormuz remains unclear in many respects. Among other things, there are conflicting reports regarding how much oil is currently flowing through the strait each day. Market reports from energy agencies and China’s trade balance figures next week promise to provide some clarity."

"A month ago, the US Energy Information Administration (EIA), which will kick things off on Wednesday, lowered its expectations for shipments through the Strait of Hormuz. For the third quarter as a whole, it even projected larger production losses in the Gulf region than those recorded in July."

"Given the growing number of reports about “workarounds” such as ship-to-ship transfers, the EIA could now take a more optimistic view. At the same time, it had slightly raised its forecast for US oil production next year, primarily reflecting higher oil price assumptions."

"If this trend continued, it would at least confirm that the Strait of Hormuz has become increasingly passable. Oil prices would then be more likely to decline."

"Of particular interest will be the development of OECD inventories and the outlook for global oil demand. In China especially, the current energy crisis has accelerated the shift towards electric mobility, increasingly dampening Chinese oil demand."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)