Commerzbank forecasts a decline in Brent crude to USD 85 by year-end as geopolitical risk premia fade, though sticky diesel and natural gas prices threaten to sustain Eurozone inflation for years.
Commerzbank analysts project a decline in oil futures from USD 104 to USD 85 by the end of the year. This downward pressure is driven by the normalization of Middle East crude exports, which have largely recovered to pre-war levels due to increased transit activity through the Strait of Hormuz, leading to a reduction in geopolitical risk premia.
Commerzbank expects oil futures to fall toward USD 85 by year-end.
European natural gas prices are expected to exhibit a slower rate of decline compared to crude oil, according to Commerzbank. This persistent pricing environment is identified as a key factor that will keep Euro area inflation elevated through mid-2027.
The elevated pricing is expected to contribute to persistent inflation in the Euro area until mid-2027.
Diesel prices are projected to ease more slowly than crude oil prices, creating a divergence in the energy market. This relative price stickiness is cited by Commerzbank as a primary contributor to the ongoing inflationary pressures within the Euro area.
Diesel prices are easing more slowly than crude oil, which maintains upward pressure on Euro area inflation metrics.
Commerzbank analysts project Brent crude oil prices will decline from USD 104 to USD 85 as Middle East supply stabilizes. While crude markets normalize, persistent prices for diesel and European natural gas are expected to keep Euro area inflation elevated through mid-2027.
The bank cites the normalization of Middle East crude exports, which have returned to pre-war levels, leading to a reduction in geopolitical risk premia.
Inflation is expected to remain elevated until mid-2027 because diesel and European natural gas prices are projected to ease much more slowly than crude oil.