Crude Futures Surge Past $102, Bakken Discount Steady at -$3.42
WTI jumps over 3% to a five-month high on geopolitical fears, while physical market tells a different story.
West Texas Intermediate crude surged $3.40 to $102.87 per barrel on Friday afternoon, a gain of over 3.4%. The international benchmark, Brent crude, rose $3.29 to $111.95, according to live price data. Both benchmarks are trading at five-month highs. Meanwhile, the Bakken crude differential held steady at a discount of $3.42 per barrel versus WTI.
The sharp rally in futures prices contrasts with emerging softness in key physical crude markets, highlighting a market driven by fear of future supply disruptions rather than current fundamentals. According to a report from OilPrice.com, prices for physical crudes from the Middle East have softened this week as oil flows through the Strait of Hormuz have increased via ship-to-ship transfers. Some grades, like Iraq’s Basrah Medium, are now selling at a $10 per barrel discount to the Dubai benchmark.
The premium of Oman crude over Dubai, a key measure of Middle East market strength, slumped this week to its lowest level since late July, OilPrice.com reported. This is a stark reversal from March, when the Oman-Dubai differential soared to $65 per barrel during a near-closure of the Strait of Hormuz. Analysts note the futures market is currently "disconnected from the fundamentals," with paper traders fearing an escalation in hostilities while the physical market reflects rising shipment volumes.
Adding to the complex price picture, global crude freight rates have skyrocketed. According to a summary from Rigzone, analysts at Goldman Sachs reported the global average crude freight rate has surged above $20 per barrel, up from just $3 per barrel a year ago. This significant increase in the cost to ship oil is a supporting factor for delivered crude prices.
For Bakken operators, the rally in the headline WTI price is a direct positive for revenues, with local crude now priced above $99 per barrel net of the differential. However, the widening disconnect between buoyant futures and softer physical benchmarks bears watching. It suggests underlying global supply is not as tight as futures prices imply, which could lead to volatility. Furthermore, the soaring freight rates could impact the competitiveness of U.S. crude exports in certain global markets.
Natural gas prices moved against the trend in energy commodities, edging down $0.12 to $3.04.
Source
Live Price Data, OilPrice.com, Rigzone
