Iran's Oil Flood Crushes Global Crude Prices Amid Rising Middle Eastern Supply
Global crude oil markets are experiencing steep discounts as Middle Eastern supply increases. According to Reuters, physical crude oil cargoes are selling at a discount across the globe, with cash Dubai slipping to a discount of 27 cents a barrel on Tuesday.
The steep drop in prices is attributed to the 60-day interim deal between the U.S. and Iran, which has allowed some shipping to resume in the Strait of Hormuz. Tehran is ramping up oil exports, seeking sales beyond China, after Washington temporarily lifted sanctions as part of the deal.
A wave of crude offers from Abu Dhabi National Oil Co, Kuwait Petroleum Corp, and Iraq's SOMO have also boosted prompt supply, depressing Middle East benchmarks Dubai, Oman, and Murban to discounts. Asian refiners, which typically buy crude two months in advance, have already booked cargoes for delivery up to August.
Analysts note that refineries in the East have been well supplied for the next two months and have no need for incremental barrels, leading to a weak market. Discounts for European and West African grades have also widened this week with the increase in Middle East supply.