Oil prices pulled back on Tuesday while physical crude markets surged to record highs, with traders taking a breather even as the underlying supply crisis worsens.
WTI crude was trading at $113.7, up modestly on the day, while Brent slipped to $109.2, reflecting a cooling in futures after a sharp run higher driven by panic buying in physical markets.
Meanwhile, real-world crude prices hit levels not seen before. Dated Brent—used to price much of the world’s physical oil—rose above $144 per barrel, with some cargoes effectively pricing north of $150 as refiners scrambled for immediate supply.
So while futures are pulling back, physical markets certainly are not.
At least 12 million barrels per day of supply—roughly 12% of global output—remains effectively shut in due to the disruption around the Strait of Hormuz. That has forced refiners in Europe and Asia to bid aggressively for replacement barrels from the North Sea, Africa, and the Atlantic Basin.
North Sea Forties has already traded at record outright prices, and premiums for prompt cargoes have surged. Dated Brent is now well above futures, pointing to tight supply for immediate delivery.
Buyers are looking for cargoes that can be loaded now and move without relying on Hormuz. Morgan Stanley said the pressure is concentrated in the prompt market, where supply is tightest.
Refined products are following. European diesel and jet fuel prices are hovering near record levels, reinforcing the tightness across the barrel.
For now, the market remains defined by access to prompt barrels.
By Julianne Geiger for Oilprice.com
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