International spot oil prices have surged above $140, completely out of control. Will domestic oil prices continue to rise?

Just as everyone was waiting for oil prices to fall, bad news came: even spot international oil prices didn’t drop—instead, they surged again to $141, hitting a new high since 2008.

Compared with the $109 Brent crude quote in the futures market, this price is a full $32 higher.

Why is the spread between spot and futures oil prices so large? As oil prices keep rising, does that mean domestic fuel prices will rise further in the future?

International oil prices hit a record high

According to the latest reports from financial media, on April 2 the spot Brent crude price jumped to a peak of $141.37 per barrel. This level is the highest since 2008. Compared with the previous day, it surged sharply by $13, and this price exceeded the peak seen during the 2022 Russia-Ukraine war.

Meanwhile, based on data from the futures market, the Brent crude futures quote is only $109. Between the two, there is a spread of about $32.

The difference between the two is that spot oil prices mean “pay and take delivery.” After 10–30 days, the crude can be transported back to China. For some oil-scarce countries, high oil prices are something they must endure; otherwise, social operations would come to a standstill.

As for Brent futures prices, they are forward transaction prices—reflecting the financial market’s expectations for future oil prices. Many people still believe the war will end and that supplies will recover in the not-too-distant future.

From this perspective, the financial market has seriously underestimated how much this oil crisis will affect oil prices.

According to a research and statistics study by U.S. investment bank Citigroup, this war has already caused a global shortfall in Japan-U.S. oil supply of 4.4 million barrels. If the Strait of Hormuz continues to be blocked, in the future the global oil supply shortage will reach 8 million barrels per day.

Global oil consumption is roughly around 100 million barrels per day. If about 10% of supply disappears, it will directly pressure oil prices.

This huge spread between spot and futures—at its core—is a disconnect between “current tightness” and “future expectations,” which is also the key signal that international oil prices have completely lost control.

This isn’t just that oil prices are simply rising. It’s that there isn’t enough crude in the spot market to be fought over, while the futures market is still “deluding itself.” This mismatch will only make oil price frenzy last longer.

The rise in oil prices has already dealt a major blow to global supply chains.

For domestic conditions, according to market research data, after oil prices rose, the daily shipment volume at gas stations fell by about 40%, which has caused some impact on the transportation industry.

But compared with the wild surge in overseas oil prices, China has long already started measures to cap prices and ensure supply.

Put another way, when the international spot oil price average reaches $130, the state will step in and provide fiscal subsidies to oil refining and processing plants and gas stations.

At this point, regardless of whether international oil prices rise to $140 or $150, the prices of finished refined products at the terminal will no longer be allowed to rise—they will be locked in.

In addition to fuel price caps, for chemical products closely related to everyday life—such as fertilizers and pesticides—the same approach applies.

After oil prices rise, the state urgently issues measures requiring all production capacity to prioritize meeting domestic demand. No matter how high international fertilizer prices get, domestic production companies must, on top of meeting domestic farming needs, export the remaining portion to the outside world.

Prices can rise, but there is also an upper limit. They must not affect the cost of agricultural production.

Therefore, no matter how much the international oil price keeps spiking, don’t be too worried that supply prices will rise. The biggest difference between the domestic market and overseas is that in people’s livelihood areas, the government will naturally step in.

Author statement: personal views, for reference only