Business
Middle East oil becomes world’s most expensive as supply disruption deepens
Middle East crude turns the world’s most expensive as supply disruptions and Hormuz risks distort benchmarks and tighten global markets.
Middle East oil prices have surged to record highs, becoming the most expensive globally as the Iran conflict disrupts supply flows, distorts key benchmarks and forces refiners to rethink sourcing strategies.
Key highlights
- Middle East crude becomes most expensive globally
- Dubai benchmark hits record $157.66 per barrel
- Supply disruptions cut exports by over 30%
- Asian refiners forced to cut output or seek alternatives
- Benchmark distortions raise pricing concerns
Benchmark prices hit unprecedented highs
Key Middle East crude benchmarks have climbed sharply amid tightening supply.
Dubai crude was assessed at a record $157.66 per barrel, surpassing even historical peaks seen in global oil markets, while Oman crude futures also surged to all-time highs above $150 per barrel.
The sharp rise has considerably widened premiums over benchmark swaps, highlighting extreme tightness in available cargoes.
Supply disruption drives price surge
The rally is being driven primarily by a steep decline in exports.
Middle East crude shipments dropped to about 11.7 million barrels per day in March, down from nearly 19 million bpd in February and roughly 32% lower than a year earlier.
The disruption stems from halted shipping through the Strait of Hormuz, a critical artery for global oil flows.
Asian refiners under pressure
Rising prices are pushing up costs for Asian refiners, many of whom rely heavily on Middle Eastern crude.
Faced with elevated feedstock costs and limited availability, several refiners have begun reducing operating rates, while others are actively seeking alternative supply sources.
Pricing distortions raise concerns
Market participants say the surge has also exposed distortions in benchmark pricing.
Some traders argue that the Dubai benchmark no longer accurately reflects market conditions, as reduced supply and changes in deliverable crude grades have skewed pricing dynamics.
Concerns have been raised that remaining grades used in pricing are not fully representative of broader Middle Eastern crude flows.
S&P Global Platts, however, maintains that its pricing continues to reflect spot market activity and has sought feedback on its benchmark methodology.
Alternative supply gains traction
As Middle East supply tightens, demand for crude from other regions is rising.
Spot premiums for oil from the Americas and Africa have increased sharply, with Brazilian crude reaching record premiums and most West African cargoes already sold.
This shift underscores a broader realignment in global oil trade flows as buyers diversify supply sources.
What next
Oil markets are likely to remain volatile as long as supply disruptions persist.
Further escalation in the Iran conflict or prolonged constraints in the Strait of Hormuz could keep Middle East crude prices elevated and sustain pressure on global energy markets.
FAQs
Q1: Why is Middle East oil the most expensive now?
Supply disruptions and reduced exports have driven prices sharply higher, pushing benchmarks to record levels.
Q2: How much have exports fallen?
Exports dropped by about 32% year-on-year (Y-o-Y) and majorly compared to the previous month.
Q3: Why are benchmarks being questioned?
Traders say pricing may be distorted due to limited supply and changes in deliverable crude grades.
Q4: What are refiners doing in response?
Many are cutting output or sourcing crude from alternative regions like Africa and the Americas.
Follow Inspirepreneur Magazine for the business news.