Key Points
- Murban crude rose $4.52, or 4 per cent, to $117.60 a barrel on Friday.
- Brent settled at $106.60 on Thursday after gaining 3.41 per cent, while WTI settled at $94.61.
- Physical Gulf crude remains under pressure from shipping disruption, even with prospects of a US-Iran truce weighing on futures.
SINGAPORE: Physical Gulf crude oil prices remained above $115 a barrel on Friday, with Abu Dhabi’s Murban crude rising to $117.60, while Brent futures held above $105 as the oil market balanced supply risks against renewed hopes for a US-Iran truce.
Murban, a key benchmark for Abu Dhabi crude and an important reference for Asian buyers, rose $4.52, or 4 per cent, to $117.60 a barrel, according to market data reported by Gulf News.
Brent crude, the global benchmark, settled at $106.60 a barrel on Thursday, gaining $3.52, or 3.41 per cent, in its highest close since Sept 15. West Texas Intermediate (WTI), the US benchmark, settled at $94.61, up about 2.7 per cent.
Brent then eased in early Friday trading, falling 87 cents, or 0.82 per cent, to $105.73 a barrel at 0212 GMT. WTI fell $1.56, or 1.65 per cent, to $93.05.
The differential between physical Gulf crude and the main futures benchmarks has become an important feature of the market during the US-Iran war.
Murban at $117.60 was nearly $11 above Thursday’s Brent settlement and more than $23 above WTI. The gap reflects crude oil’s higher value as it can be physically loaded in the Gulf and shipped to Asian refineries under current shipping conditions.
Disruptions keep oil prices up
The physical market has been affected by disruption to oil flows through the Strait of Hormuz since the war began on Feb 28. Tanker availability, insurance costs and the need for alternative shipping arrangements have increased the cost of delivering Gulf crude.
The price gap between Murban and Brent has also widened sharply in recent weeks. ICE data showed the Murban-Brent spread at $11.50 on Thursday, compared with $4.81 on Aug 28.
The widening spread indicated that the physical Gulf market was trading with a larger premium over the international Brent futures benchmark.
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Meanwhile, the futures market has remained highly sensitive to diplomatic developments.
US and Iranian negotiators have been discussing a phased arrangement that could involve the reopening of the Strait of Hormuz and an easing of the US economic blockade on Iran. Hopes for progress have weighed on Brent and WTI prices during Friday trading.
At the same time, attacks on Saudi Arabia have kept the physical supply risk elevated. Any disruption to Saudi production, export terminals or shipping routes could further tighten Gulf crude.
The contrasting movements underline the difference between paper and physical oil markets. Futures prices respond quickly to expectations about future supply, while physical benchmarks reflect the price of crude that buyers can actually secure, load and transport.
For Asian refiners, physical price is important because Middle Eastern producers account for a major share of the region’s crude supply. Higher freight and insurance costs can therefore raise delivered cost even when futures prices decline.
The oil market is now watching the US-Iran diplomatic process, the security of the Strait of Hormuz and the recovery of Saudi export routes. These factors will determine whether the premium on physical Gulf crude narrows or remains elevated.
Geopolitical risks remain the main driver of crude prices. The US-Iran war has disrupted normal Gulf oil flows, while uncertainty over the Strait of Hormuz has raised freight, insurance and supply costs. Saudi
Arabia’s export disruptions have added pressure, while diplomatic efforts between Washington and Tehran have periodically reduced the risk premium in futures markets.
