From Colombia to the North Sea, the Middle East to Texas, the global market for crude cargoes is becoming tighter by the week as supplies grow more constrained and risks to production spiral.
Prices for actual barrels from the North Sea, Asia and the Americas are trading at the highest in a half decade.
Key price spreads that show how urgently oil refineries need benchmark Brent barrels are soaring.
It is little wonder. The list of known supply curbs and disruptions is growing and traders are also having to contend with mounting tensions in the Persian Gulf — the world’s largest export region.
On Tuesday, drones attacked and temporarily halted a giant Saudi Arabian pipeline. Two days before that, four oil tankers were sabotaged at the key refueling port of Fujairah in the United Arab Emirates.
“We have now reached the stage where crude differentials globally and across all slates are strong,’’ said Greg Newman, co-CEO of Onyx Commodities, which specializes in energy derivatives. “There is only one conclusion: The prompt market is short of oil. With the current situation, the outright price should continue to strengthen until demand suffers.”
West Texas Intermediate (WTI) crude for June delivery on Friday slid US$0.11 to settle at US$62.76 a barrel on the New York Mercantile Exchange. Prices rose 1.8 percent for the week.
Brent for July settlement on Friday fell US$0.41 to end the session at US$72.21 a barrel on the London-based ICE Futures Europe exchange. The global crude benchmark was up 2.3 percent for the week.
Brent crude futures for July were trading close to US$3.40 a barrel more than for December, the highest premium in the life of those two contracts, according to ICE Futures Europe data.
That means traders are willing to pay more to obtain supplies as soon as possible.
That same strength is also showing up in North Sea derivatives markets.
Contracts for difference have been trading in a backwardated structure — meaning more immediate prices are higher — that has strengthened markedly over the past two weeks, PVM Oil Associates data showed.
The dated-to-frontline swap contract settled at its strongest since 2014 on a rolling basis, according to Bloomberg fair value data.
It is the same picture in the markets where traders are buying physical supplies.
In the North Sea, Petroineos — the trading and refining venture between PetroChina Co (中石油) and Ineos Group — was on Thursday willing to pay a US$1.20 a barrel premium to a benchmark to buy Forties crude, according to traders and brokers monitoring a pricing window run by S&P Global Platts.
Nobody was willing to sell at that level.
The grade has not traded that strongly since January 2014, data compiled by Bloomberg show.
In the US, Heavy Louisiana Sweet (HLS) crude this week rose to the highest since 2014.
HLS is now the most expensive crude in the Gulf Coast complex. Buyers in the US are seeking to substitute the loss of sanctions-hit Venezuelan supply and production curtailments from Canada.
Meanwhile, WTI crude prices in Houston, a critical indicator of export demand, trades at US$7.50 a barrel above benchmark WTI crude, after reaching a nearly three-month high on Wednesday.
Colombia’s Vasconia crude recently traded at a five-year high.
One place where that strength is not showing up is at Cushing, the US trading hub for WTI.
Inventories there have increased for the past four weeks as shale production swells and the ability to get supplies out of storage tanks remains constrained.
Traders in the US have also been gearing up for further stockbuilds ahead, with key timespreads weakening for the rest of this year.
However, in Asia, a tender for Al-Shaheen crude was this week awarded at an average of about US$3.25 a barrel premium to Dubai benchmark price.
Traders have said that is the highest since at least 2013.
Oman crude futures are still more than US$3 a barrel above Dubai swaps, while all Middle Eastern barrels — as well as Russian grades like Sokol — are trading strongly.
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