Middle East crude becomes world’s most expensive as war disrupts supply

Benchmark prices for Middle East crude have surged to record highs, making them the most expensive globally, even as trading volumes decline amid the war in Iran and some traders question the relevance of regional benchmarks due to supply disruptions.

The rally in benchmarks used to price millions of barrels of Middle East crude bound for Asia is raising costs for Asian refiners, forcing them to seek alternatives or further cut output in the coming months.

Dubai crude was assessed at a record $157.66 per barrel for May-loading cargoes on Tuesday (March 17), according to S&P Global Platts, surpassing the previous all-time high for Brent futures of $147.50 set in 2008.

That pushed the Dubai premium to swaps to $60.82 per barrel on Monday (March 16), compared with an average of $0.90 in February, according to Reuters data.

Similarly, Oman crude futures climbed to a record $152.58 per barrel, lifting their premium to Dubai swaps to $55.74 per barrel, versus an average of just $0.75 in February.

Dubai prices have been distorted by a wide gap with Murban futures, which settled at $114.03 per barrel on Tuesday, according to three trading sources.

Middle East crude exports to Asia fell to 11.66 million barrels per day (bpd) in March, down from nearly 19 million bpd in February and about 32% lower year-on-year, as the conflict disrupted shipping through the Strait of Hormuz, according to data from analytics firm Kpler.

Several Asian refiners have cut operating rates.

Tight supply

Some refining industry sources attributed the price surge to reduced deliverable supply during the Platts Market on Close (MOC) process after the agency removed three crude grades that transit the strait.

One source said the pricing had become unrepresentative, as the remaining grades — Oman and Murban — do not adequately reflect the broader benchmark used to price Middle East barrels and some Russian crude.

Another refining source said trading of Middle East crude for May-loading cargoes had stalled because Dubai and Oman benchmarks were out of alignment. The sources declined to be identified.

“Platts Dubai continues to reflect the tradable value of Middle East sour crude in the spot market,” an S&P Global Energy spokesperson said, adding that activity during the Platts MOC had been robust this month, with multiple cargo deliveries.

However, traders said TotalEnergies has been the main buyer receiving cargoes in the Platts window. The French company purchased 42 cargoes of Oman and Murban crude, or about 21 million barrels, this month, according to trade data. TotalEnergies declined to comment.

Platts said on Monday it is seeking immediate market feedback on Middle East crude deliverability and on the methodology used for its Dubai benchmark.

Source: Folha de São Paulo

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