The oil market faces a widening gap between futures and physical prices. Brent futures rallied to a five-month high near $112 amid tensions over Iran and Houthi attacks on Saudi exports. However, Dated Brent, the physical benchmark, plummeted to near $120, down roughly $15 in two weeks.
Factors include stable Hormuz flows despite attacks, cooled tanker costs, and Asian buyers shunning American crude, bolstering European supplies. Traders warn the futures rally may be unsustainable if freight costs continue sliding and supply disruptions ease. Marex's Ryan Fitzmaurice notes low oil stocks and headline risk persist, while El Nino could weigh on winter heating demand.
The spread between Dated Brent and futures, though narrowed, remains elevated historically. Regional crude differentials from Oman to Iraq have also eased, with Asian cargoes selling at a premium to Dubai that has narrowed from $35 to above $10. This divergence highlights a split between paper markets and real-world supply dynamics.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing