Brent: Questionable flows, fragile outlook – Commerzbank

Commerzbank's Commodity Research team, headed by Barbara Lambrecht, highlights uncertainty surrounding crude flows through the Strait of Hormuz and conflicting information about transit data as key factors clouding the outlook for Brent crude. To clarify supply and demand, upcoming reports from the EIA, IEA, OPEC, and China's trade figures will be released.

Commerzbank notes that a sustained increase in China's crude imports would help maintain higher flows and potentially cap Brent prices. The Strait of Hormuz remains a source of contention, with conflicting reports on the volume of oil passing through daily. Reports from energy agencies and China's trade balance figures are expected to provide some clarity in the coming week.

A month ago, the EIA lowered its expectations for shipments through the strait for the third quarter, projecting larger production losses in the Gulf region compared to July. Growing reports about workarounds, such as ship-to-ship transfers, may cause the EIA to adopt a more optimistic stance. However, the EIA recently raised its forecast for US oil production next year, driven by higher oil price assumptions.

If this trend continues, it would suggest that the Strait of Hormuz has become more passable, potentially leading to a decline in oil prices. Key developments to watch include OECD inventories and the outlook for global oil demand, particularly in China, where the energy crisis has accelerated the shift towards electric mobility, dampening Chinese oil demand.