Commerzbank expects Brent crude to fall $20

Brent may drop $20 on screen, but the physical barrel is still expensive

A German bank puts a number on the optimism: Commerzbank anticipates a $20 per barrel fall in Brent crude, around 19%, as oil flows from the Middle East recover. The White House had announced shortly before that prices would plunge with peace coming soon to Iran. So goes the story. The problem is that the crude traded on screen and the crude that physically reaches a European refinery are two different things, and the latter does not get cheaper by decree.

The freight that eats the cut

Chartering a supertanker has gone from around $100,000 to $900,000 a day. Nine times more. Transport, insurance and war risk premiums add between $20 and $30 per barrel that do not show up in the futures price. In other words, Brent may fall to $85 and the barrel arriving in Rotterdam may still cost the same or more. The drop the report boasts about is swallowed by freight.

Some argue the Strait of Hormuz will keep pushing up crude prices for more than a year, and that this surcharge will not disappear no matter how much the wells start pumping again. The most optimistic calculation assumes flows normalize within weeks; the pessimistic one starts from the premise that the geopolitical risk premium has moved into the tariff for good.

Diesel goes its own way

What leaves the Gulf is already almost as much crude as before, but refined products remain 30% below. Russian diesel shipments are also missing, weighed down by attacks on its refineries. The International Energy Agency speaks of diesel tension well into the year. Crude is moving; the diesel that moves trucks and tractors is not.

The bottleneck is not the well, it is the plant. Refining capacity can be built, but nobody invests over 30 years in infrastructure that may end up half-used once demand goes electric. Ten years of transition are enough for the numbers not to add up. And without new plants, diesel will keep setting its own price.

Why doesn't petrol fall even when Brent drops?

Because the pump price is not formed by the futures quote alone. Freight costs, war insurance and the shortage of refined products weigh more than the theoretical barrel. Add to that the fact that crude not extracted because wells sit idle does not come back overnight. The market can celebrate a number on screen while the consumer keeps paying the real bill.

The optimism has an expiry date

The report comes at a time when any good news about crude is worth its weight in headlines. The recovery of flows in the Middle East is real and prevents wells from shutting down due to inactivity, which would indeed be a medium-term problem. But from there to the pump feeling it is a stretch nobody has measured.

Brent falling to $85 still leaves the barrel well above what was paid before the last episode. With these differentials, consumption should plummet. It doesn't. And freight is still nine times higher.