Middle East Oil Prices Surge Amid Strait of Hormuz Bottleneck

Crude oil prices for Middle Eastern exports have surged to their highest point since March due to supply disruptions in the region. Spot premiums for Dubai crude nearly doubled to $12.74 per barrel during the week of September 8-14, while Oman crude premiums rose to $12.62 per barrel, their highest since late May.

The Strait of Hormuz bottleneck has contributed significantly to these premium spikes. Oil flows through the strait have dropped dramatically since the US-Iran conflict escalated, falling from around 20 million barrels per day to approximately 11.7 million barrels per day, a decline of over 40%.

Asian refiners are struggling to find alternative sources, shelling out premiums of around $24 per barrel for US and West African crudes earmarked for December loading. This is particularly challenging for countries like China, India, Japan, and South Korea, which have historically relied on Gulf crude as a significant portion of their feedstock.

The renewed escalation in September has reignited the premium spikes that had begun to cool. Threats against commercial shipping and reported attacks on tanker routes have made insurers and shipowners nervous again, effectively re-imposing the risk premium that had briefly eased.