Commerzbank strategists expect Brent to retain a significant risk premium even if a US–Iran agreement is reached and the Strait of Hormuz reopens. They argue that shipping and production will normalise only gradually, inventories are being drawn down, and energy agencies are likely to cut supply and demand forecasts, keeping Oil prices elevated versus pre‑war levels.

Risk premium anchored by Hormuz disruption

"Even in the event of an agreement, however, oil prices are likely to fall only limitedly at first, as a return to the old normal is not to be expected for now. It is likely to take some time before shipping traffic in the strait normalises and production in the region returns to its usual level. Not only does ramping up production take time; energy and export facilities have also suffered damage."

"In any case, the strait is likely to remain a critical choke point for the time being, which justifies a risk premium. All these factors suggest that even in the event of an agreement, the oil price will initially (and from our perspective even until the end of the year) settle at a noticeably higher level than before the Iran war."

"Deeper insights into the fundamental effects on the oil market are promised by the new monthly reports from the three energy agencies. Forecasts on both the supply and demand side are likely to be revised further downward. In April, the International Energy Agency still assumed that the effects on both sides would be confined to the second quarter; the supply and demand forecasts for the second half of the year were barely adjusted."

"The inventory data are also of interest, as they show the extent to which stocks are already being drawn down. The OECD inventories, which are reported with a lag, are likely to have fallen noticeably in March for the first time, while the more timely global seaborne oil inventories are likely to have declined sharply for the second consecutive month in April."

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