Brent futures are trading at their biggest premium to the Middle East’s Dubai benchmark since 2022, as global oil benchmarks soared following the US and Israeli attacks on Iran.
Brokers and traders said differential futures and swaps (EFS) contracts on the day exceeded $6 per barrel. For most of last week, before the conflict erupted, the difference was less than $2.
While Brent crude oil prices rose significantly, Dubai over-the-counter pricing was characterized by confusion. Shipping through the Strait of Hormuz has effectively come to a standstill, disrupting the exit of crude oil from the region, and supply concerns are leading to a decline in trading activity in the Middle East, including Oman crude futures contracts.
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Another factor pushing up prices is a significant jump in transportation costs, as there is increasingly less spare capacity within the oil-rich sea lanes to transport the oil that the region’s suppliers are still producing.
“The Strait of Hormuz remains in turmoil and time is running out,” JPMorgan Chase analysts including Natasha Kaneva said in a note. “If production does not resume within 21 days, production in the fields may begin to cease.”
