Oil: Gradual price decline with dark transit support – Commerzbank

Commerzbank economists Dr. Jörg Krämer, Dr. Vincent Stamer and colleagues argue that Middle East crude exports have nearly returned to pre-war levels thanks to dark transits through the Strait of Hormuz. They expect high risk premia to fade, with Oil futures falling from about USD 104 toward USD 85 by year-end. Diesel and European natural gas prices should ease more slowly, keeping Euro area inflation elevated until mid-2027.

Risk premia and gradual de-escalation

"Oil exports from the Middle East have recovered significantly, thanks in part to the “dark transits” of tankers through the Strait of Hormuz that we had anticipated. Nevertheless, prices for fossil fuels such as crude oil, diesel and natural gas remain high. "

"If oil exports continue their upward trend thanks to dark transits, prices should soon start to fall. However, at USD 104 per barrel on the futures market, oil prices remain high."

"One reason is the persistently elevated level of risk: for several weeks now, the Houthis in Yemen have stepped up their involvement in the conflict, making passage through the Bab al-Mandab Strait at the southern end of the Red Sea even riskier. Iran itself could also intensify its attacks in the Persian Gulf again or target key pipelines in Saudi Arabia"

"This increases the risk premium embedded in oil prices. Over time, however, these risks should subside and oil prices should fall, moving towards USD 85 by year-end."

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