Oil: Diverging energy risks shape outlook – Commerzbank

Commerzbank’s Norman Liebke highlights that Oil and European natural gas are reacting differently to Middle East supply risks, with Brent supported by rerouted flows while gas remains constrained by lost LNG from Qatar and US cargoes diverted to Asia. He notes China’s upcoming industrial production data will be key for assessing refinery runs and crude processing trends.

Middle East tensions and China data

"Oil and gas prices rose again this week. The price of Brent crude rose by 6.5%, and the European gas price by just under 9%. The situation in the Middle East remains the key driver for energy prices, and even though an agreement between Iran and Oman regarding transit rules through the Strait of Hormuz appears to be in sight, significant issues remain unresolved."

"The markets are likely to remain focused on developments in the Iran conflict, with increased attention being paid to the energy markets as a result. The oil price is likely to see noticeable relief following a sustained reopening of the Strait of Hormuz, but the situation on the European gas market is expected to remain tight even then. For base metals, China’s industrial production figures and the release of the International Copper Study Group’s monthly report are likely to be relevant."

"The IEA and OPEC have each revised their forecasts for oil demand this year downwards by 200,000 barrels per day. The IEA now expects demand to fall by 1.6 million barrels per day, whilst OPEC still anticipates an increase of 580,000 barrels per day. According to the IEA, oil supply from outside OPEC+ is set to rise by 690,000 barrels per day."

"However, due to significant production losses in the Gulf region, total supply is expected to fall by 4.3 million barrels per day, meaning the oil market will be significantly undersupplied this year. According to the IEA, the supply deficit in the third quarter stands at 1.8 million barrels per day. This is 1 million barrels per day more than previously expected."

"China’s industrial production figures, which will be released next Monday, are of particular interest to the oil market. They will provide further insight into how China’s crude oil processing fared in July. After all, China has significantly helped ease pressure on the global oil market due to lower demand resulting from reduced refinery processing."

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