Oil Prices Mixed Amid Gulf Tensions; Bakken Differential Holds at -$3.42

Oil benchmarks showed a split performance on Friday, May 8, with West Texas Intermediate (WTI) crude slipping while global benchmark Brent edged higher. The movement comes amid renewed clashes in the Persian Gulf that are dimming hopes for a swift peace deal to reopen the critical Strait of Hormuz.

According to live price data, WTI Crude settled at $94.50 per barrel, down $0.31 (-0.33%) on the day. Brent Crude traded at $100.12, a minor gain of $0.06 (0.06%). The discount for Bakken crude at the wellhead versus WTI was $-3.42. Natural gas prices declined to $2.75, down $0.02.

The day's trading was dominated by geopolitical risk, according to a Rigzone report. Fresh clashes between the U.S. and Iran rattled markets, with U.S. forces conducting airstrikes on Iranian oil tankers and targeting missile sites. Iran criticized the U.S. for violating a ceasefire agreement. Traders are speculating on whether the fighting will derail a fragile ceasefire, with the Strait of Hormuz effectively closed since the war began in late February.

"Oil is trading between two risks: diplomacy on one side and another escalation on the other," said Charu Chanana, chief investment strategist at Saxo Markets, in the Rigzone report. Brent had risen 1.2% earlier to settle around $101, but still posted a weekly loss of about 6%, reflecting extreme volatility.

A separate analysis from BMI, a Fitch Solutions unit, reported by Rigzone, argues that Brent futures prices are understating severe stress in the physical crude market. The analysts highlighted a substantial widening in the spread between Dated Brent (physical barrels) and front-month futures contracts.

"Dated Brent, representing physical barrels for prompt delivery, often trades at a premium to the front-month futures due to immediate demand, logistical constraints, or supply disruptions," the BMI analysts stated. They noted Dated Brent prices have been pushed well above $130 per barrel, with some Middle Eastern grades above $135, reflecting a scramble for available crude for refining.

This physical tightness, driven by the closure of the Strait of Hormuz, is creating significant cost pressures for refiners due to elevated shipping and insurance rates. The BMI analysts warn this is leading some refiners to reduce output, which could raise fuel costs further.

Implications for the Bakken For Bakken operators, the current environment presents a mixed picture. A WTI price firmly above $94 provides strong economic incentive for production. However, the persistent Bakken differential of -$3.42 versus WTI represents a regional discount that impacts netback revenue. The severe stress in the global physical market, as indicated by high Dated Brent prices, underscores a global supply shortfall that supports longer-term price strength. Yet, the extreme volatility and reliance on geopolitical developments in the Middle East introduce significant uncertainty for planning and hedging. The focus for the region remains on maintaining operational efficiency to capitalize on elevated prices while navigating the discount and broader market instability.