"The world's most important spot crude oil price" soars above $140, marking the first time since 2008!

Source: Wall Street Insights

The Strait of Hormuz has been blocked for more than a month, and in combination with Trump’s hardline remarks breaking the market’s expectation that the fighting will soon end, the global physical crude oil market is undergoing its most severe price shock in over eighteen years.

On April 2, the spot Brent crude oil price touched $141.37 per barrel, the highest level since 2008. Compared with the price of more than $128 on the previous day, it surged sharply, and this price also exceeded the peak during the outbreak of the Russia-Ukraine conflict in 2022.

Meanwhile, the WTI May contract’s single-day high gain reached 13.8%, and the United States crude oil settlement price for the first time since 2022 broke above $110 per barrel.

Trump’s nationwide televised address released a hardline signal, causing the market’s short positions betting on the fighting ending quickly to rapidly cover and reverse—this was the direct trigger for the surge in oil prices. The International Energy Agency has characterized this crisis as the “most severe supply shock in the history of the oil market,” and its duration is still difficult to predict at present.

Physical oil prices and futures prices see a sharp widening of the gap

Spot Brent is one of the world’s most important crude oil pricing benchmarks, widely used to guide the pricing of about two-thirds of global physical crude oil trades. Unlike Brent futures, the benchmark traded on the Intercontinental Exchange, spot Brent reflects the actual transaction price of North Sea spot cargoes—that is, the physical price for cargoes with confirmed loading dates.

On Thursday, spot Brent rose to $141.37, while Brent futures on the same day were still trading around $107. The price spread between the two was unusually wide. This gap stems from the fundamentally different pricing logic between the physical market and the futures market: the former directly reflects the scarcity level of barrels available for delivery, while the latter is mainly dominated by financial trading, with more of the pricing being for “paper barrels” rather than physical ones.

The spot premium in the North Sea region has risen to historical highs in recent days, and traders are competing to bid for every batch of cargo that can be obtained—this is the core driver supporting spot Brent’s deviation from the futures track and its rapid upward surge.

WTI near-month spreads hit a historic record, with supply tightness escalating

Tight signals in the U.S. crude oil market are heating up sharply at the same time. The WTI near-month spread—i.e., the price difference between the two most recent expiring contracts—briefly widened to more than $16 per barrel on Thursday, the largest premium on record.

Buffalo Bayou Commodities’ macro trading director Frank Monkam said, “The war premium after Trump’s speech is concentrating in the near-month contracts, which is why the near-month spread has expanded dramatically.”

When the near-month contract price is far higher than the forward contract price, the market usually interprets it as pricing for extremely tight near-term physical supply. Traders noted that this surge is driven by two forces together: first, short positions betting on the fighting ending quickly are being forced to cover; second, buyers in Asia and other regions are purchasing large amounts of U.S. crude oil, and the market expects that U.S. crude supply will tighten significantly over the coming weeks.

The Strait of Hormuz has currently been blocked for more than a month. The strait handles nearly one-quarter of the world’s oil and natural gas transportation volume, and passage is severely restricted, with refiners scrambling to find any available alternative sources of cargo.

In addition, U.S. oil prices have nearly doubled since the beginning of the year. The retail price of gasoline in the United States has broken above $4 per gallon, reaching the highest level since 2022, and inflationary pressure is rising accordingly. The sustained surge in oil prices is also prompting worries in the market that inflation could rebound while economic growth slows at the same time, leaving investors facing a more complex macro pricing environment.

(Editor: Wen Jing)

Keywords:

                                                            Oil price