The natural oil market is in chaos with prices being launched, while traders and refineries desperately seek readily available reserves. In the North Sea, from 40 bids for cargo this week, just four were covered. Dated Brent reached a record of $144 a barrel, surpassing the 2008 levels. Supplies from Nigeria were formed up to $25 over the reference point. Analysts warn of a lack of slow in the coming weeks due to disruption of supplies from the Middle East, with European refineries expected to reduce production, exacerbating the lack of diesel and aircraft fuel.
Analyticalally:
Although oil prices in the stock market, in which future fulfillment contracts are sold, recorded the largest weekly dip since 2022 in the natural oil market prices have been launched as traders and refineries desperately search around the world for readily available reserves.
In the North Sea, the world's most important natural slow market, traders submitted 40 offers for cargo this week, of which only four were covered.
Prices of the natural oil market skyrocket
The shipments to be delivered over the next few weeks changed hands to unprecedented prices that exceeded $140 a barrel. Refineries are looking for supplies in increasingly remote areas, leading to a series of unusual transactions and a rapid increase in bonuses for any oil ready for shipment right now.
Dated Brent, the most important benchmark in the natural oil market used to bill millions of barrels daily, reached the record of $ 144 a barrel before the ceasefire this week, surpassing the high levels of 2008.
By Friday he had subdued at $126 a barrel. However, it was found at levels exceeding Brent's futures with a July delivery of more than $30, while traders, including Trafigura Group and Gunvor Group, offered $22 a barrel over the Dated Brent for oil shipments to the North Sea with delivery in late April and early May.
Supplies from Nigeria for loading the following month were sucked up to $25 a barrel over the reference point, compared to less than $3 before the start of the war in Iran.
In a few weeks the oil shortage is felt
Traders speaking in Bloomberg explained that panicking movements in the basic natural oil markets worldwide demonstrate the size of the slow shortage expected to be felt over the coming weeks, as the loss of supplies from the Middle East leaves a growing gap.
High prices signal that probably some European refineries will follow the example of Asians and reduce production, a move that can help balance the market for crude oil, but will exacerbate the lack of vital products such as diesel and aircraft fuel.
«There's just a shortage of crude oil» explains Neil Crosby, Head of Investigation of Sparta Commodities AS. «The Brent natural oil market is in chaos and has now gone too far. At this rate, even European refineries will be forced to reduce the rate of use of their facilities, perhaps as early as next month.».
Contract markets meet reality
Even if talks this weekend lead to the restart of normal flow through the Straits of Hormuz, relief is unlikely to come soon enough to prevent a crisis. It takes weeks for crude oil from the Gulf to reach the refineries in Asia and Europe.
The last shipments that crossed the Straits of Hormuz before the crisis now reach their destinations. This is where contract markets meet reality and «the 40-day gap in global energy flows is fully revealed» stresses Sultan al Jumper, CEO of Abu Dhabi National Oil Co., in a post on LinkedIn on Thursday.
This gap is visible in the premium that the refineries are willing to pay to secure shipments of crude oil that are available immediately.
Traders in certain Asian refineries, speaking under the condition of anonymity, explain that they no longer focus on the price, but simply seek to secure barrels of crude oil where they can, in order to ensure energy security.
Asian countries, most dependent on the Straits of Hormuz for their supply of crude oil, have exceeded their traditional sources and are looking for oil around the world.
The impact on oil products
The huge gap between the natural slow and the future contracts partly reflects the same dynamics, with barrels achieving huge bonuses as quickly as they can deliver a market situation known as backwarding.
The extreme level of the direct delivery crude oil premium puts enormous pressure on the market, traders and analysts said. Smaller refineries face difficulties due to the significantly increased financial needs due to higher prices, as well as the challenge of risk compensation in a market where the natural crude oil they buy is much more expensive than the more liquid derivatives associated with it.
«This is a huge price risk management problem. on paper the profit margins are fantastic, but the actual cash flows resulting from the purchase of a load and the decision to refine it may vary significantly» points out Roberto Ulivieri, a consultant at Midhurst Downstream and former Saudi Aramco refining economist.
As a result, some refining companies are beginning to withdraw from the market and the consequence will be to reduce their production which will put further pressure on the oil markets.
The crisis also knocks on the US door
Already, aircraft and diesel fuel prices have been launched at record or almost record levels, over $200 a barrel. In the politically critical US petrol market, stocks have shrunk to the lowest levels in the last nearly 16 years, according to the U.S. Energy Agency (EIA).
And as oil buyers flock to the US, analysts warn that the market shortage will be felt there afterwards.
«Natural product markets are not affected by social media. Instead, they have been unabated as disturbances have spread from Asia to the Atlantic basin», said Amrita Sen, co-founder of the Energy Aspects advisory company. «If future fulfilment contracts are not adapted to actual market conditions, US exports could easily remain at high levels —if ship availability permits— to a point where there is not enough slow left for the U.S. refineries».
Source: OT
