Oil: Diverging energy risks shape outlook – Commerzbank

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

Oil and gas prices have risen again this week, with Brent crude up by 6.5% and European gas prices up by nearly 9%. The Middle East situation is the primary driver of energy prices, and while an agreement between Iran and Oman on transit rules through the Strait of Hormuz seems imminent, significant issues remain unresolved. Markets will likely remain focused on Iran developments, with increased attention on energy markets.

Oil prices are expected to see relief if the Strait of Hormuz reopens, but European gas market tightness is likely to persist. For base metals, China's industrial production figures and the International Copper Study Group's monthly report are key. Both the IEA and OPEC have lowered their oil demand forecasts for the year by 200,000 barrels per day, with the IEA now expecting a 1.6 million barrels per day decrease and OPEC anticipating a 580,000 barrels per day increase.

Due to Gulf production losses, total supply is projected to fall by 4.3 million barrels per day, resulting in a significant undersupply in the oil market this year, with the IEA predicting a 1.8 million barrels per day supply deficit in the third quarter, 1 million barrels per day more than previously anticipated. China's industrial production figures, released next Monday, will offer further insight into China's crude oil processing in July, as China has helped alleviate global oil market pressure due to lower demand resulting from reduced refinery processing.