As the Strait of Hormuz is nearly blocked, physical oil prices have surged to extremely high levels, leaving traders, governments, and shipping companies struggling to cope with the immense pressure on the global oil market.
Analysts point out that the price of Dated Brent crude has reached a historic high of $144, indicating a scarcity of actual oil supply. Meanwhile, Brent futures for June traded at just $96.51 per barrel in early trading on Friday.
Experts explain that the significant price gap between the two indicates that the severity of the oil shortage far exceeds what financial markets suggest. Martijn Rats of Morgan Stanley noted that ICE Brent futures are merely financial contracts, while Dated Brent reflects the current actual price of oil available for transport.
Andrejka Bernatova, founder and CEO of Dynamix Corporation III, stated that the $144 price should be viewed as a warning rather than an exception. She said, “The Dated Brent reaching $144 is not just a price record. It is the physical market telling you that real crude oil is becoming scarce.”
With the Strait of Hormuz nearly completely blocked, the $144 price is more of a warning than a historical anomaly until these transport flows are restored.
Typically, about one-fifth of the world's oil and liquefied natural gas passes through the Strait of Hormuz, a narrow waterway connecting the Persian Gulf to the larger ocean. Before the attacks began on February 28, the strait handled a daily traffic of 120 to 140 vessels, a number that has significantly decreased.
According to data from shipping intelligence firms Kpler and Lloyd’s List Intelligence, only five vessels passed through on Wednesday, and seven on Thursday. Currently, over 600 vessels are trapped in the Gulf, including 325 oil tankers. Even if a ceasefire agreement is maintained, analysts expect the daily safe passage through the strait to be only 10 to 15 vessels.
The tensions between the U.S. and Iran have further exacerbated uncertainty. Iran insists that all passing vessels must coordinate with its navy.
President Donald Trump stated that Iran has not adhered to the “safe passage” agreement reached in the ceasefire, while Iranian Foreign Minister Abbas Araqchi countered that it is the U.S. that has failed to comply with the agreement. Further talks aimed at achieving a permanent ceasefire are planned in Islamabad.
In the face of an unstable spot market, countries are quickly taking action to secure alternative supply chains.
Singapore and Australia announced on Friday that they are working towards a formal legal agreement on energy and critical supplies. Singapore Prime Minister Wong Kan Seng and Australian Prime Minister Anthony Albanese agreed to expedite negotiations in these areas.
The energy relationship between the two countries is close, with Australia supplying over one-third of Singapore's liquefied natural gas, while Singapore provides 26% of Australia's refined fuels.
