Oil Plunges 5% as Kuwait Moves Cargoes, Bakken Differential Holds

Front-month West Texas Intermediate (WTI) crude oil futures plummeted 5.3% on Tuesday, trading at $86.46 per barrel in midday trading. The sharp sell-off, which saw WTI drop $4.84, was mirrored by Brent crude, which fell 4.42% to $90.08 per barrel. The price for Bakken crude at the Clearbrook, Minnesota, hub held a differential of -$3.42 versus WTI.

The dramatic price drop coincides with the first significant sign that crude supply from the Persian Gulf may be reaching global markets despite the ongoing regional conflict. According to a report from OilPrice.com, Kuwait Petroleum Corporation (KPC) is offering at least 4 million barrels of crude to buyers in China and South Korea. This marks the first such offering since the war involving Iran began on February 28, which severely choked tanker traffic through the critical Strait of Hormuz.

The news suggests some crude is navigating the strait, alleviating fears of a prolonged, severe supply disruption. Traders told Bloomberg that two very large crude carriers (VLCCs) carrying the Kuwaiti cargo have cleared the Strait of Hormuz. Kuwait, which lacks an export pipeline alternative to the strait, has seen its exports severely stifled for months. A KPC official stated last week it could take up to 12 weeks after the strait re-opens to restore production curtailed since the war began.

The potential for incremental supply from the Middle East is pressuring global benchmarks. Meanwhile, natural gas prices saw a minor increase, rising $0.01 to $3.15 per MMBtu.

For Bakken operators, the steep decline in the underlying WTI price directly impacts revenue, though the stable local differential offers some consistency in regional pricing. The sudden downturn highlights the continued volatility and geopolitical sensitivity of the oil market. While the Bakken formation is insulated from direct export constraints like those in the Persian Gulf, its price is tethered to global swings driven by such events.

The related news underscores a global supply dichotomy. While Kuwait attempts to move crude, a separate report from Rigzone highlights operational extremes in the Permian Basin, where some natural gas drillers are shutting in wells. This contrast between potential oil supply easing and ongoing regional disruptions in gas markets contributes to a complex price environment.

The midday price action reflects a market reassessing supply risks, with the Kuwaiti cargo offering serving as a catalyst for a significant correction following oil's recent rally.