Thanks for pointing this out, so indeed the OAuth M2M should be executed only with Databricks Service Principals.

Interestingly, I found out that on Azure Databricks SQL Warehouse Permissions can not be set (at least not through GUI) for a Databricks Service Principal (the SP can not be found on the Permissions menu), so this rules out this possibility to utilise this connection method as "Can Use/Can Manage" permissions can not be given for the Databricks SP. Or is there another way to provide this?