The notion of a single oil price is increasingly outdated. Futures contracts, once considered "the price," now diverge sharply from physical crude costs. Brent futures represent only 60‑70% of landed crude in Asia, down from the usual 90%, and just 50% of diesel prices. Historically, the spread between Brent spot and futures averaged $1/barrel, but this year it has surged to nearly $8 and spiked above $20 in September, underscoring futures' failure to reflect true market balances. Shipping costs have exploded—up to tenfold since the Iran war—driving Atlantic crude landing costs in Asia to five times prewar levels. Strait of Hormuz flows have rebounded to about 11 million barrels per day, yet total Middle Eastern flows remain 2.5 million barrels below prewar levels due to constrained vessel availability and longer, more complex routes. U.S. policy rhetoric has deterred traders from holding long positions, while ship‑to‑ship transfers, now the main driver of Hormuz traffic, have pushed freight rates to record highs. Concurrently, global refining capacity shortages, Ukrainian strikes on Russian refineries, and shutdowns of export‑oriented Middle Eastern plants have pushed gasoline, jet, and diesel prices to historic highs, with products now trading at double crude values—a unprecedented shift.
Key entities include Argus Media Group, Kayrros, Energy Aspects, and major oil trading hubs. The situation highlights the fragility of current oil infrastructure and pricing mechanisms.
Source: Financial Times Companies · Summarized by HeadlinesBriefing