Oil: Mounting supply risks and price pressures – Commerzbank

Commerzbank’s Charlie Lay notes that Brent and West Texas Intermediate (WTI) have pulled back after sharp gains, but underlying risks to Oil remain elevated. Escalation in the Persian Gulf and potential closure of the Strait of Bab al-Mandab are seen as key threats to supply routes. Lay highlights emerging bottlenecks in refined products and warns that any sustained disruption to Saudi export alternatives could renew upward pressure on Oil prices.

Geopolitics keeps crude market tight

"Brent crude oil prices fell 3.9% to USD96.78 last Friday but rose 9.9% for the week. It was the fourth consecutive weekly rise."

"Pressure on the oil market is mounting. The renewed escalation in the Persian Gulf has pushed crude oil prices up sharply. Prices could rise further, as another transport route, the Strait of Bab al-Mandab could be closed as well."

"However, risks in the Red Sea have increased. The Houthis said they launched missiles and drones at Saudi oil facilities in Jizan and Yanbu, while the Saudi-led coalition responded by striking Houthi military positions in Yemen. This followed attacks on Saudi-linked oil tankers and threats to blockade Saudi ports."

"These developments are particularly significant because Saudi Arabia has been using its Red Sea export infrastructure to circumvent disruptions through the Strait of Hormuz. Any sustained disruption to these alternative routes could put renewed upward pressure on oil prices."

"The first bottlenecks, however, are looming in some oil products whose inventories have fallen significantly."