Physical Market Signals Bigger Oil Shock Ahead

Brent crude has risen above $100 a barrel for the first time since July, but this milestone may be overshadowed by growing concerns in the physical market.

The price of Brent crude futures settled at $101.21 a barrel on Wednesday, up 3.4 percent from the previous day, after Iran said it had attacked 10 ships near the Strait of Hormuz following US strikes that sank five Iranian oil tankers.

Oman/Dubai crude for November delivery is trading around $121 a barrel, a significant premium to Brent, indicating a structural anomaly in the physical market.

Aamir Makda, commodity analyst at Choice Broking, noted that Middle Eastern benchmarks (Oman/Dubai) trade at a premium of around $20 a barrel compared to Atlantic Basin benchmarks (Brent), suggesting a higher premium on the availability of Middle Eastern barrels.