Oil physical premiums spike

Oil traders can still buy Brent and West Texas Intermediate futures near $95 to $98 a barrel, but refiners chasing real cargoes have recently paid well above $130 for prompt delivery. (markets.businessinsider.com, cnbc.com) On April 10, CNBC reported Platts assessed Dated Brent — the benchmark for physical North Sea cargoes with assigned delivery dates — at $131.97 a barrel, after it hit a record $144.42 on April 7. June Brent futures were trading near $96.51 at the same time. (cnbc.com, spglobal.com) Bloomberg reported on April 11 that North Sea cargoes for delivery in coming weeks changed hands above $140 a barrel, while June futures fell 13% over that week to about $95. Traders submitted 40 bids in the North Sea market and only four drew offers. (bloomberg.com) The split starts with what each market prices. Futures are financial contracts for later delivery, while Dated Brent tracks actual barrels loading in the physical spot market 10 days to one month ahead. (spglobal.com, spglobal.com) The squeeze also reflects a shipping problem, not just an oilfield problem. The International Energy Agency said on March 12 that flows through the Strait of Hormuz had plunged from about 20 million barrels a day before the war to “a trickle currently,” with limited pipeline capacity available to bypass the waterway. (iea.org, iea.org) That matters because the strait normally carries about 20 million barrels a day of oil, or roughly one-quarter of global seaborne oil trade, and about 80% of those flows head to Asia. When that route stalls, buyers compete for the smaller pool of cargoes that can arrive soon. (iea.org, eia.gov) Insurance and freight costs have added another layer to the premium. S&P Global said war-risk premiums for ships in the Persian Gulf have hit record highs and insurance rates have quadrupled in some cases, while Reuters reported on April 7 that India was considering sovereign guarantees to keep insurers covering Gulf voyages. (spglobal.com, msn.com) The result is a market where the screen price can look calmer than refinery economics on the ground. Bloomberg reported smaller refineries are facing bigger financing needs and price-risk problems, and Sparta Commodities’ Neil Crosby said some European plants may have to cut runs if prompt crude stays this expensive. (bloomberg.com) Official spot data has also moved higher, though not as far or as fast as the prompt physical market. The U.S. Energy Information Administration’s latest daily table, released April 8, showed Brent spot at $127.61 a barrel on April 2 and West Texas Intermediate at Cushing at $114.01 on April 6. (eia.gov) The gap closes only when ships, insurance and loading schedules normalize. Until then, oil on a screen and oil on a tanker are trading as two different products. (cnbc.com, bloomberg.com)