Crude prices continue to see wild price swings. With no signs of de-escalation in the West Asia conflict, Brent crude futures continue to trade near their four-year record high levels, last quoted near the $109/bbl mark, up nearly 8% in early Asian trade.
However, analysts have noted that futures prices actually remain far below the actual spot price. Media filings citing data published by S&P Global reported that the actual spot price for physical cargoes of Brent crude has soared above the $140/bbl mark, reaching its highest level since the 2008 financial crisis.
The spot price of current physical cargoes of Brent crude oil was quoted above the $141/bbl mark on Thursday, as shipments through the crucial trade route — the Strait of Hormuz — remain disrupted. The waterway passage transits nearly 20% of global energy flows.
The spot price, also known as Dated Brent, reflects the current supply and demand for physical Brent crude oil that is scheduled for delivery within the next 10 to 30 days.
Mismatch between futures and spot price
Brent crude futures price is quoted near the $109/bbl mark, while data published by S&P showed it was around $141/bbl on Thursday. This indicates a difference of nearly $32 between the spot and futures price, reflecting the market scarcity of crude supplies.
With the huge mismatch between future prices and cargo prices, markets are pricing in high tightness in the availability of physical crude. The futures market does not accurately reflect the on-ground price, as it is largely limited to financial trading in so-called paper barrels.
“The futures price is almost giving a false sense of security that things are not that stressed,” said Amrita Sen, founder of Energy Aspects, in a television interview with CNBC.
Markets skeptical despite OPEC+ output release
US crude, West Texas Intermediate (WTI), continues to trade near its record high levels, quoted near the $112/bbl mark. WTI futures surged by nearly 12%, reaching their highest levels since Russia’s invasion of Ukraine, as US President Donald Trump threatened intensified strikes in Iran.
Although OPEC+ is considering a potential output increase, experts note that this is unlikely to have an immediate effect on market prices, which remain highly elevated.
With the surge in spot prices and almost every benchmark of crude, analysts note that the possibility of crude at $200 is no longer improbable.
(With inputs from Bloomberg)
