Commerzbank’s commodity team, led by Barbara Lambrecht, warns that recent declines in Oil prices may prove temporary as tanker traffic through the Strait of Hormuz is only gradually recovering and US inventories sit well below seasonal norms. The bank argues that expectations for a rapid normalization of Middle East supply are excessive and could reverse if shipping and OPEC output disappoint.

Strait traffic and inventories key

"Commodity prices have fallen sharply across the board this week: in the oil market, this is due to the prospect of supply from the Gulf region normalising. Oil is now barely more expensive than before the start of the Iran war. We fear, however, that market participants are too optimistic."

"The market apparently firmly expects oil shipments from the Middle East to return to normal quickly, although data on tanker traffic through the Strait of Hormuz has not yet reflected this."

"If the number of transits does not increase more strongly next week either, scepticism in the market is likely to grow, so that the oil price is likely to rise again."

"Additional support for prices is coming from the weekly report on US inventories: US stocks – crude oil, gasoline and middle distillates combined – are now 7% lower than usual for this time of year."

"The sharp decline in oil prices has also led to a notable shift in the Brent forward curve. The time spreads, i.e., the price differences between the various contract maturities, have narrowed significantly. At the front end, e.g., between the first two forward contracts (1M/2M), the forward curve is now slightly upward-sloping, i.e., in contango."

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