Why Physical Crude Premiums Collapse Despite the Hormuz Crisis
US Crude Inventories Fall But Gasoline Stocks See Surprise Build Companies are prioritizing dividends, buybacks,… Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
The price of physical crude has collapsed in recent weeks from premiums of over $30 per barrel above the Brent benchmark in early April, to near-parity or even at small discounts in the May buying cycle window.
That’s not because the worst-ever disruption in oil markets has eased and supply has suddenly become plentiful from sources other than the Middle East.
It’s because refiners are adjusting their buying behavior and backing out of nearly $150 per barrel physical cargo prices in hopes of a resolution to the conflict and an eventual reopening of the Strait of Hormuz sooner rather than later.
Over the past weeks, refiners have been using a mix of buffers to mitigate the shock of the supply loss.
They have been drawing down inventories, cutting refinery runs, and taking advantage of the stock releases that the International Energy Agency (IEA) is coordinating in the biggest-ever400 millionglobal strategic reserves release.
Moreover, China has slashed crude oil imports to the lowest since 2022, when the country was still under Covid lockdowns, also easing the upward pressure on physical crude prices.
Many refiners decided to undergo spring maintenance a bit earlier than planned.
Others are in scheduled maintenance, preparing for the peak summer season.Related: Why Physical Crude Premiums Collapse Despite the Hormuz Crisis U.S.
crude oil exports have jumped to an all-time high, with WTI barrels going into Asia and Europe.
All these factors have contributed to the crash in physical crude prices in the May buying cycle.
But this reprieve could be too short-lived, and physical prices could begin soaring again very soon as the peak refinery run season approaches and the buffers in the market are being exhausted amid a lack of resolution to the Hormuz blockage, analysts say.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | ▲ +0.34% |
| WTI Crude | $96.90/bbl | ▲ +0.21% |
| EN590 Diesel | $846/MT | ▲ +0.18% |
| Jet Fuel A-1 | $1090/MT | ▲ +0.55% |
| Mazut M100 | $450/MT | ▼ -0.15% |
| Bitumen 60/70 | $470/MT | ▲ +0.08% |
| Sulphur Gran 99.5% | $470/MT | ▼ -0.44% |
| Urea 46% Gran | $650/MT | ▲ +1.12% |
| NPK 16-16-16 | $460/MT | ▼ -0.28% |
| Nat Gas TTF | $15.42/MMBtu | ▲ +0.92% |
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