European and African crude oil prices surged to unprecedented levels on Wednesday, defying a sharp decline in oil futures following the announcement of a U.S.-Iran ceasefire on Tuesday. Despite futures contracts for Brent and WTI dropping 13% and 16% respectively to below $100 a barrel, physical market prices remained elevated, reflecting traders’ anticipation of extended disruptions in oil supply.
Notably, the price for North Sea Forties crude reached an all-time high of $146.43 per barrel on Thursday, as per LSEG data. This divergence between futures and physical market prices underscores strong demand from Asian and European refiners for crude oil outside the Middle East, pushing up premiums for prompt replacement barrels from Europe and Africa. The market expects these supply interruptions to continue for months, delaying a full recovery of the supply chain.
Sparta Commodities analyst Neil Crosby emphasized that the gap between physical and paper markets will persist for some time, given the prolonged nature of the supply constraints.
Meanwhile, Iran’s near-closure of the Strait of Hormuz and attacks on energy infrastructure in the region have driven premiums on crude oil cargoes to record levels. Forties crude traded at a historic premium of $20.25 above dated Brent on Wednesday, while dated Brent itself was nearly $27 above June Brent futures, LSEG data.
Consultancy Energy Aspects noted that although futures prices reacted sharply, these changes are unlikely to immediately affect physical oil flows or production. The firm added that the two-week ceasefire is too brief for operators to restart refineries and oil fields due to the ongoing risk of renewed shutdowns.
Other North Sea crude grades, including Brent, Oseberg, Ekofisk, and Troll, also reached new premium records on Wednesday. Additionally, U.S. WTI Midland crude delivered to Europe traded at a $20.70 premium to dated Brent, marking its highest level ever. Since dated Brent is derived from the prices of five North Sea crudes and WTI Midland, these rising premiums have significant implications for the global oil market, as dated Brent prices influence over 60% of internationally traded crude.
In West Africa, Angolan Cabinda crude traded at around $10 above dated Brent or higher on Wednesday, setting a record high for that grade, further highlighting the widespread impact of supply disruptions on regional crude prices.
