The Brent-WTI spread widened sharply in early trading Thursday, pushing toward an 11-year high as Middle East supply disruptions drove a deepening split between global and U.S. crude markets.
Brent crude surged nearly 7% to above $114 per barrel while U.S. West Texas Intermediate edged up just 0.2% to around $96. The divergence has pushed the spread to roughly $18 per barrel, a level not seen since the mid-2010s oil market dislocations.
Seaborne crude markets are experiencing intensifying stress amid escalating attacks on Gulf energy infrastructure following strikes on Iran’s South Pars gas field. While Brent is directly exposed to disruptions in the Strait of Hormuz, WTI continues to track relatively stable U.S. supply conditions.
The gap is even more pronounced in physical markets.
Middle Eastern benchmark grades have surged well beyond paper benchmarks, with Oman crude trading near $153 per barrel and Dubai around $136.
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Beyond the geopolitical premium driving global benchmarks away from U.S. crude, the widening gap is starting to show up in downstream stress for import-dependent consumers.
In India, the official crude import “basket” jumped to $146.09 per barrel on March 17, up 111.7% versus February’s $69.01 average. Analysts are now warning that at these levels state-run retailers Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum face a rapid build in under-recoveries unless pump prices rise or fiscal support returns.
Elara Capital estimated that above $110 crude, petrol/diesel margins could swing by about ?6.3 per litre and LPG losses rise by roughly ?10.2 per kg, implying a ?32,800-crore increase in annual LPG under-recoveries, while ratings agency ICRA said every $10/bbl rise in crude can add $14-$16 billion a year to the import bill, raising inflation and fiscal risks even if retail pass-through is delayed.
JPMorgan analysts noted this week that Dubai and Oman benchmarks are now “a more accurate reflection of the physical dislocation,” pointing to tightening availability of exportable crude in the region even as headline benchmarks remain comparatively contained.
The widening spread highlights a growing structural split in the market. Brent is pricing immediate disruption risk across globally traded barrels, while WTI remains anchored by domestic inventories, steady shale output, and expectations of potential U.S. policy intervention, including strategic reserve releases or export measures.
Traders are increasingly using the Brent-WTI spread itself as a real-time gauge of how severely the conflict is constraining global supply flows.
By Charles Kennedy for Oilprice.com
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