Global oil markets have been thrown into turmoil as key Middle Eastern crude benchmarks — Oman and Dubai — surged to record highs following supply disruptions caused by the ongoing US-Israel war with Iran, raising concerns about market distortions and benchmark reliability.
Spot premiums for Dubai crude soared to an unprecedented $56 per barrel on Monday, a dramatic jump from an average of just 90 cents in February, according to data from S&P Global Platts and Reuters. The premium now accounts for nearly one-third of Dubai crude’s total value, with May-loading cargoes assessed at $153 per barrel, compared to $111.76 for Murban futures.
Similarly, Oman crude premiums surged to around $51 per barrel over Dubai swaps, far exceeding February’s average of 75 cents, underscoring the severity of supply constraints in the region.
The sharp price escalation is largely attributed to disruptions in oil shipments through the Strait of Hormuz, a critical global energy corridor. According to data from analytics firm Kpler, Middle Eastern crude exports to Asia dropped significantly to 11.67 million barrels per day (bpd) in March, down from nearly 19 million bpd in February and approximately 32 per cent lower than the same period last year.
The surge in benchmark prices is placing significant pressure on Asian refiners, many of whom have begun reducing operating rates or seeking alternative crude supplies from other regions.
Market participants have raised concerns that the current pricing environment may not accurately reflect broader market fundamentals. Some refining sources attribute the spike to reduced supply available during the Platts Market on Close (MOC) process, particularly after several crude grades that transit through the Strait of Hormuz were excluded from assessment.
“It is unnatural and unfair pricing due to thin trading,” said one industry source, noting that the remaining benchmark grades — Oman and Murban — may no longer represent the wider Middle Eastern crude market.
Despite these concerns, S&P Global maintains that its Dubai benchmark continues to reflect spot market conditions, highlighting robust trading activity during the MOC process, including multiple cargo deliveries.
However, traders noted that French energy giant TotalEnergies has been the dominant buyer in recent transactions, acquiring 24 Oman and Murban cargoes — equivalent to around 12 million barrels — during the current trading cycle.
In response to market concerns, Platts has initiated a review of its Dubai crude benchmark methodology and is seeking industry feedback on the deliverability of Middle Eastern crude.
Meanwhile, the supply crunch has driven up premiums for alternative crude sources. Brazilian crude premiums have surged to between $12 and $15 per barrel over ICE Brent, while West African crude for April loading has also seen increased demand, with premiums rising and most cargoes already sold.
The ongoing volatility highlights the fragility of global oil supply chains and the far-reaching impact of geopolitical tensions on energy markets, particularly for import-dependent regions like Asia.
By Reuters
