Prompt barrels drive oil alarm

A frantic hunt for oil cargoes that can be delivered at once has tightened the global crude market, even as headline prices have swung with every turn in the fragile ceasefire around Iran and the Strait of Hormuz. Behind the moves in futures, traders, refiners and state buyers have been competing for physical barrels from the North Sea, West Africa, the United States and anywhere else supplies can move without delay.

That rush reflects a deeper market fracture. While some tanker traffic has started to edge back through Hormuz after the truce announcement, the flow remains far below normal and the security risk has not lifted. The waterway normally handles about a fifth of global oil and liquefied natural gas shipments, and weeks of disruption have left buyers unwilling to wait for diplomatic assurances before securing feedstock for refineries.

Physical prices have reacted far more violently than paper benchmarks. Reuters reported that some grades for prompt delivery were trading near $150 a barrel last week, with North Sea Forties reaching record levels and dated Brent moving sharply above front-month futures. That gap matters because it signals a shortage of barrels available now, not simply a speculative rise in sentiment. Traders describe it as a classic squeeze in the spot market, where refiners needing crude immediately are forced to outbid rivals for whatever cargoes can be loaded and shipped quickly.

The International Energy Agency has described the Middle East conflict as the largest supply disruption in the history of the global oil market. In its March oil market report, the agency said crude and product flows through Hormuz had fallen from around 20 million barrels a day before the war to a trickle, with Gulf producers cutting output by at least 10 million barrels a day and global supply projected to plunge by 8 million barrels a day in March. The IEA also warned that refined products and LPG were under severe strain, widening the shock well beyond crude alone.

Those strains have been felt most sharply in Asia and Europe, where refiners are highly exposed to Gulf supply. Asian processors depend on the Middle East for more than half their crude and naphtha intake, making any interruption especially painful for fuel and petrochemical markets. Buyers in Taiwan, China and elsewhere have moved to secure cargoes as soon as narrow shipping windows appeared. Taiwan’s state refiner CPC booked a tanker to bring in about 2 million barrels, while Glencore and other trading houses rushed to line up ships after the ceasefire announcement.

Shipping costs have compounded the problem. Spot VLCC rates on the benchmark Middle East to China route more than doubled from pre-war levels, according to Reuters, as war-risk premiums rose and vessel availability tightened. Some tankers had already repositioned toward the Americas, and others were left waiting near the Gulf as owners demanded clearer guidance before sending ships through mined or contested waters. Even with the first laden supertankers now moving through the strait again, hundreds of vessels remain stranded or delayed, keeping freight markets stressed and slowing any return to normal trade flows.

Supply anxiety has also spread because alternative routes and spare capacity cannot fully compensate. Saudi Arabia has restored full pumping capacity on its East-West pipeline to 7 million barrels a day, improving its ability to bypass Hormuz, but attacks earlier this month had already cut output and pipeline throughput. Other producers do not have the same room to reroute exports, and some infrastructure across the Gulf has been damaged or shut for safety reasons. The result is a market that may look calmer in futures trading on a given day while still remaining severely undersupplied in its physical core.

Governments have tried to cushion the blow through strategic stock releases, fuel subsidies and export controls on products, yet these measures mainly buy time. The IEA said member countries had agreed in March to make 400 million barrels from emergency reserves available to the market, a reminder that inventories can soften a shock but not quickly rebuild disrupted trade patterns. For refiners, the pressing question is not whether barrels exist somewhere in the world, but whether the right crude can arrive at the right plant soon enough to keep runs stable.