The world’s physical oil markets are confounding concerns about the growing supply shortfall that’s being caused by the Iran war. Physical crude grades ripped to record premiums soon after the war began before fizzling out as refineries recalibrated their buying in response to the ensuing disruption. While traders cautioned as recently as a month ago that the downturn might prove short-lived, ther...
The world’s physical oil markets are confounding concerns about the growing supply shortfall that’s being caused by the Iran war. Physical crude grades ripped to record premiums soon after the war began before fizzling out as refineries recalibrated their buying in response to the ensuing disruption. While traders cautioned as recently as a month ago that the downturn might prove short-lived, there have been few signs of a resurgence since. Instead, oil from Kazakhstan was offered for sale last week at the deepest discounts in four years — without finding buyers. Likewise, premiums for one of Angola’s flagship grades collapsed, and the North Sea benchmark Dated Brent has slumped from its post-conflict peak. Even crude from the United Arab Emirates was last sold to Asia at a discount to the regional Dubai benchmark, a far cry from tens-of-dollars premiums seen early in the war. Despite the restrictions at Hormuz and the supply hole it’s created, a bigger rally has been averted by booming US exports, governments tapping emergency reserves, and China demonstrating a surprising ability to dial back imports. One of the key things holding back physical prices is a reluctance among buyers to secure barrels too far in the future in case flows through Hormuz rebound, according to Energy Aspects. “If flows through the Strait pick up everyone will run harder but right now there’s too much uncertainty,” said Kit Haines, head of oil at the consultant. “Nobody wants to chase prices higher and be left holding an August cargo that they paid a lot of money for.” Read More: Why Oil’s Not at $200 After the Biggest Supply Shock in History Dated Brent , the North Sea benchmark that’s used to price more than two-thirds of the world’s crude, hit a record above $140 a barrel in April. It fell to near $98 on Monday. Dubai has also fallen from a high of over $160 a barrel to about $94. Spreads between monthly futures contracts — used as a gauge for market tightness — remain at elevated level...