Oil Price: Hormuz Supply Shock Widens Gap Between Future and Physical Fuel Global oil markets are experiencing a stark divide as the conflict in the Middle East intensifies, with physical fuel prices surging far beyond the levels predicted by oil futures. The Strait of Hormuz, a critical chokepoint for global oil shipments, has been nearly closed due to attacks on energy infrastructure, leading to a sharp rise in Brent crude prices. The benchmark has climbed over 50% to around $112 per barrel, but the cost of actual oil being refined into petrol, diesel, and jet fuel has risen even more sharply, reflecting the growing difficulty in securing supplies. Refiners in Asia are now paying steep premiums above Brent prices to source oil from distant regions, underscoring the severity of the shortage. The impact of this supply crisis extends beyond oil markets, affecting industries reliant on fuel. In India, petrol prices have increased by up to ₹2.35 per litre, while trucking companies face higher fuel costs, some shipping firms are reducing purchases, and European airlines warn that rising jet fuel prices—now exceeding $200 per barrel—will be passed on to passengers. The gap between futures prices and the actual cost of physical oil is partly attributed to measures taken by governments to curb price spikes, such as releasing emergency stockpiles. However, analysts argue that the broader economic consequences of the disruption are more significant than what futures markets suggest. Jeff Currie, chief strategy officer at Carlyle Group Inc., noted that paper markets have become disconnected from physical markets, describing the situation as an "enormous supply shock." Goldman Sachs and Citigroup have warned that oil futures could surpass the 2008 record of $147.50 per barrel if the conflict persists.#strait_of_hormuz #international_energy_agency #goldman_sachs #carlyle_group_inc #citigroup
