Key Moments
- Physical Brent crude in the North Sea touched $141.37 per barrel, the highest level since 2008.
- The Strait of Hormuz has remained closed for more than a month, in what the International Energy Agency called the largest supply disruption in oil market history.
- A widening gap has emerged between physical Brent prices and futures, with ICE Brent trading near $107 per barrel on April 2.
Physical Brent Jumps to Multi-Year High
Global crude benchmarks have surged, with prices climbing above $140 per barrel and reaching their highest point since 2008, according to a Bloomberg report dated April 3.
Brent crude for physical delivery in the North Sea advanced to $141.37 per barrel, exceeding the levels seen during Russia’s full-scale invasion of Ukraine, the report said.
Analysts cited a sharp divergence between futures pricing and the physical market, where tightening supplies are pushing spot prices markedly higher.
Dislocation Between Futures and Physical Markets
The Brent futures market, which underlies a significant portion of global oil trade, is driven heavily by financial activity tied to so-called “paper barrels.” These contracts reflect expectations about future supply and demand conditions.
In contrast, the physical market is reacting to immediate shortages, with supply constraints intensifying amid disruptions connected to the conflict with Iran, the report said.
| Contract/Benchmark | Price | Context/Date |
|---|---|---|
| Physical Brent (North Sea) | $141.37 per barrel | Highest since 2008, reported April 3 |
| ICE Brent futures | ~$107 per barrel | April 2 |
| Brent futures | $112.84 per barrel | March 22 |
| U.S. West Texas Intermediate | $98.75 per barrel | March 22 |
Strait of Hormuz Closure Amplifies Supply Shock
The International Energy Agency stated that the Strait of Hormuz has remained shut for more than a month, describing the situation as the largest supply disruption in oil market history.
The waterway handles roughly one-fifth of global crude flows, and its closure has left refineries struggling to secure adequate feedstock, intensifying tightness in physical markets.
The last period when Brent was at comparable levels was 18 years ago, in the run-up to the global financial crisis, which brought an end to a prolonged rally in oil prices.
North Sea Demand and Record Cargo Premiums
Additional upward pressure on prices has come from robust demand in the North Sea, where traders have been paying record premiums for cargoes, the report said. This strength in physical differentials has contributed to the elevated spot Brent levels.
Futures Lag Spot as Market Looks Ahead
Despite the surge in the physical market, Brent futures traded on Intercontinental Exchange Inc. have remained below 2022 highs, hovering around $107 per barrel on April 2. The report noted that this gap illustrates the forward-looking nature of futures contracts relative to spot prices for immediate delivery.
Geopolitical Tensions and Policy Moves
Oil markets have also been reacting to rising tensions between the United States and Iran.
U.S. President Donald Trump issued a 48-hour deadline to Tehran on March 22 to reopen the Strait of Hormuz, warning of potential strikes on Iranian energy infrastructure.
On March 23, Trump directed the Pentagon to postpone planned strikes on Iranian power plants and energy facilities by five days.
Price Action Around U.S.-Iran Developments
Oil prices were already moving higher earlier on March 22 as market participants monitored threats from both the United States and Iran, alongside increased Iranian crude supply after a temporary easing of U.S. sanctions.
By that time, Brent futures had risen 65 cents to $112.84 per barrel, while U.S. West Texas Intermediate gained 84 cents to $98.75 per barrel, according to market data.
Following a brief pullback tied to reports that Trump was seeking to end the conflict with Iran, prices resumed their upward trajectory on March 31.
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