US Gulf oil prices surge to highest since 2020 on Iran conflict
Synopsis
US Gulf oil prices climbed sharply as disruptions linked to the Iran conflict tightened global supplies of medium and heavy crude. According to a Reuters report, Mars sour crude, a key Gulf of Mexico benchmark, traded at an $11 premium to West Texas Intermediate, the highest level since April 2020. The surge comes as Middle Eastern producers curb output and the Strait of Hormuz faces effective closure, prompting refiners to seek alternative barrels from the United States.
US Gulf oil prices surged on Friday as the Iran conflict disrupted global supplies of medium and heavy crude, driving buyers toward American barrels. According to a Reuters report, Mars sour crude, a key Gulf of Mexico benchmark, traded at its highest premium to West Texas Intermediate since 2020 as production curbs in the Middle East and the effective closure of the Strait of Hormuz tightened supply.
Key highlights
- Mars sour crude traded at $11 premium to WTI, highest since April 2020
- Premium jumped $4 in a day and up from $1.50 a week ago
- Brent crude settled at $92.69 per barrel, highest since October 2023
- Strait of Hormuz disruption cut flows of Persian Gulf heavy crude
- Production curbs reported in Iraq and Kuwait
Heavy crude grades from the US Gulf Coast rallied sharply on Friday as geopolitical tensions disrupted oil flows from the Middle East, tightening global supplies.
Mars sour crude, a key grade produced in the US Gulf of Mexico, traded at an $11 premium to West Texas Intermediate (WTI), brokers told Reuters. The premium was the highest since April 2020 and jumped $4 from the previous day.
Just a week earlier, Mars crude had been trading at only $1.50 above WTI, underscoring how quickly supply conditions have tightened.
Other US Gulf grades also strengthened during the session. Heavy Louisiana Sweet and West Texas Sour both saw price gains as refiners sought heavier crude alternatives.
Middle East Disruptions Tighten Heavy Crude Supply
The price surge reflects increasing strain in the global market for medium and heavy sour crude, which many refineries require for processing.
The Strait of Hormuz, a critical route for exporting crude from the Persian Gulf, has effectively been closed due to the ongoing conflict. According to Reuters, the disruption has forced several producers, including Iraq, to curb production.
Additional output cuts in Kuwait have also contributed to tightening supplies, traders said.
With fewer barrels moving from the Middle East, refiners are increasingly turning to US Gulf Coast crude grades as substitutes.
Refiners Turn to US Barrels as Alternatives
Matt Smith, lead Americas oil analyst at Kpler, said refiners that normally rely on Persian Gulf heavy crude are actively searching for alternative supplies.
According to Reuters, Smith said US Gulf grades such as Mars sour crude have become natural replacements for Middle Eastern barrels, leading buyers, particularly in Asia, to bid aggressively for the available supply.
Tim Snyder, chief economist at Matador Economics, said seasonal demand is also supporting prices.
Reuters reported Snyder saying that the shift toward the summer driving season usually increases crude demand, though the current price spike is mainly tied to supply disruptions linked to the conflict.
He added that prices could remain elevated unless shipping through the Strait of Hormuz resumes.
Global Oil Benchmarks Climb
Global crude prices also moved higher alongside US Gulf grades.
Brent crude, the international benchmark, settled at $92.69 per barrel, its highest level since October 2023, reflecting growing concerns about supply disruptions in one of the world’s most important oil-producing regions.
Oil markets are closely monitoring developments around the Strait of Hormuz and production decisions by Middle Eastern producers.
If shipping disruptions persist or further output cuts emerge, analysts expect continued tightness in medium and heavy crude supply, which could keep US Gulf oil grades trading at elevated premiums.
FAQs
Q1. Why are US Gulf crude prices surging now?
Supply disruptions in the Middle East have reduced heavy crude availability, pushing refiners to buy US Gulf alternatives.
Q2. What makes Mars crude important to refiners?
Mars is a widely traded heavy sour crude from the US Gulf of Mexico used by refineries processing heavier oil.
Q3. How high did Mars crude premiums climb?
Mars crude traded at an $11 premium to WTI, the highest level recorded since April 2020.
Q4. Why does the Strait of Hormuz influence oil prices?
It is one of the world’s busiest oil shipping routes, carrying large volumes of Persian Gulf crude to global markets.
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Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
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