Bullets:
The Dubai cash market for oil, as of Friday, was about $140 per barrel. But on the futures markets in New York, Brent crude closed at just $104.
Real buyers of oil in Asia are desperate to find crude at any price, and believe that the market is meltdown down, with no new supply coming. Paper traders in New York and London, however, believe that the oil disruptions are temporary, and will be relieved by stockpile releases and a short end to the war against Iran.
The spread between Dubai and Brent is one of the highest in history. Further, the paper market almost always prices oil higher than the physical.
One of these markets is very wrong. Either new supplies will quickly enter the market and drop the price, or New York traders will lose billions on contracts offered at far lower prices.
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Report:
Good morning.
This is from the NYMEX, a chart of Brent crude oil futures. Brent closed on Friday at $103.86 per barrel:
Also on Friday, 13 March. Dubai crude oil closed at $127.86 per barrel. So Dubai crude is priced much higher than Brent, about $25 a barrel or so:
Lots of things about that are weird, and suggest that there is market manipulation going on with the New York futures. Normally. Prices for the physical crude—Dubai—and the futures contract—NYMEX Brent—move the same way, and closely together. Dubai is moving a lot higher, because of very high demand for oil, right now. But the futures market doesn’t show that.
What’s more, Brent oil usually trades at a premium to Dubai—usually the prices paid for Brent crude are higher than for the Middle East. But it usually isn’t very much. This is the price difference, typically—about $1 to $4 on average, where Brent is higher than Dubai. In 2023 we saw that spread go negative, but it was brief:
Now it’s the opposite. Dubai is at a huge premium to the Brent futures, and nobody in Asia believes that New York traders understand the market now. Dubai is physical crude oil. You have a barrel of oil, and I want it right now. I have dollars. What’s the price? That’s Dubai. And those numbers are high above what the paper futures are doing.
What’s more, those booming prices for physical crude, which keep climbing, are saying that supply is getting choked off. There are no more barrels coming. But speculators in the paper market think higher supplies are on the way, and releasing stocks from strategic reserves are going to push prices lower.
Clyde Russell is a guy we’ve quoted before, who explains that the futures market traders are saying the supply problems from the war are manageable, and temporary. But the real buyers and sellers of oil are saying we have a full-blown energy crisis, right now. Only one of these markets is right, and it’s not the guys who are shuffling paper around in New York.
The real buyers and sellers of real oil—the producers who pull it out of the ground and refine it, and the bulk buyers who need it to move ships and planes around, have a far better understanding of the problem. Traders and speculators can buy and sell based on whatever talking points are coming out of the White House, while the real-world producers and consumers of crude oil know there isn’t nearly enough.
The spot prices, what I’m paying you for one barrel of oil, right now, is the reality. The fact that Dubai is at a premium over Brent makes no sense anyway, because Brent can be used in more things, and doesn’t require transport out of the Middle East to markets in Europe. The premium last week, Dubai over Brent, was over $37. Real prices paid are rocketing higher. The war is only two weeks old, and the energy supply chain is collapsing, and will only get worse.
The hoarding of crude and fuel is coming next, on the physical. But before that, New York and London will learn what the real price is, and reset their market and wipe out the traders and speculators who made big bets based on hollow political rhetoric and talking points.
Be good.
Resources and links:
Dubai crude oil Platts futures, most recent
https://www.investing.com/commodities/dubai-crude-oil-platts-futures
Crude oil futures separate from reality as Asia physical market buckles
https://www.reuters.com/markets/commodities/crude-oil-futures-separate-reality-asia-physical-market-buckles-2026-03-12/
Futures Market Misreads the Hormuz Oil Shock
https://oilprice.com/Energy/Crude-Oil/Futures-Market-Misreads-the-Hormuz-Oil-Shock.html
Bloomberg, Oil’s Hottest Trade Accelerates as Key Spread Goes Negative
https://www.bloomberg.com/news/articles/2023-08-08/oil-s-hottest-trade-gathers-momentum-as-key-spread-goes-negative
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