Middle East crude benchmarks surged to record highs today to become the world’s most expensive oil, despite a sharp decline in trade caused by the ongoing US and Israeli war on Iran.
However, traders increasingly argue that these benchmarks no longer reflect true market conditions due to severe supply disruptions.
The rally in benchmarks, which prices millions of barrels destined for Asia, has significantly increased costs for regional refiners. As a result, many refiners are seeking alternative supplies or cutting output in the coming months. On Monday, Cash Dubai reached an unprecedented $153.25 per barrel for May-loading cargoes, surpassing Brent’s historic 2008 peak of $147.50.
Meanwhile, Dubai’s premium to swaps surged to $56.01 per barrel, a dramatic rise from February’s average of just 90 cents. Similarly, Oman crude futures climbed to $147.79 per barrel, with their premium widening sharply. In contrast, Murban futures settled much lower, highlighting pricing distortions within the market.
At the same time, exports from the Middle East to Asia dropped significantly. Shipments fell to 11.665 million barrels per day in March, down from nearly 19 million in February, as the conflict disrupted shipping through the Strait of Hormuz. Consequently, several Asian refiners reduced operating rates.
Industry sources blamed reduced supply during the pricing process after key crude grades were excluded. They argued that limited trading activity has led to inflated and unrepresentative prices. Nevertheless, S&P Global maintained that its benchmark still reflects market value.
Meanwhile, Asian buyers turned to alternative supplies, pushing premiums for crude from Brazil and West Africa to multi-month highs as competition intensified.
