"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 coupled with Trump’s tough remarks that shattered the market’s expectation that the conflict would soon be over, the global physical crude oil market is experiencing the most severe price shock in more than eighteen years.

On April 2, the spot Brent crude oil price hit $141.37 per barrel, the highest level since 2008. Compared with the previous day’s level of more than $128, the price jumped sharply. This price also exceeded the peak reached when the Russia-Ukraine conflict erupted in 2022.

Meanwhile, the WTI crude oil May contract’s biggest intraday gain reached 13.8%. The U.S. crude oil settlement price broke above $110 per barrel for the first time since 2022.

Trump’s nationally televised address released a hard-line signal, causing the market’s short positions betting on the conflict ending quickly to rapidly unwind and flip—this was the direct trigger for the surge in oil prices. The International Energy Agency has characterized the crisis as “the most severe supply shock in the history of the oil market,” and its duration is still difficult to predict.

A widening gap between physical oil prices and futures prices

Spot Brent crude oil is one of the world’s most important crude oil pricing benchmarks and is widely used to guide the pricing of roughly two-thirds of the global physical crude oil trade. Unlike Brent futures, a benchmark traded on the Intercontinental Exchange, spot Brent reflects the actual transaction prices of North Sea spot cargoes—that is, the physical prices for which the loading dates have already been determined.

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

The spot premium in the North Sea region has climbed to a record high in recent days. Traders are rushing to bid for every batch of available cargo, which is the core force supporting spot Brent breaking away from the futures track and surging rapidly.

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

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

Frank Monkam, macro trading head at Buffalo Bayou Commodities, said, “The war premium after Trump’s speech is flowing into near-month contracts, which is why the near-month spread has widened sharply.”

When near-month contract prices are far higher than deferred contracts, the market typically interprets it as pricing for extreme tightness in near-term physical supply. Traders noted that this rally was driven by two forces together: first, short positions betting on a quick end to the conflict were forced to unwind; second, buyers in Asia and other regions are snapping up U.S. crude oil in large quantities, with the market expecting U.S. crude supply to tighten significantly over the coming weeks.

The Strait of Hormuz has currently been blocked for more than a month. The strait accounts for nearly a quarter of global oil and natural gas transport volumes. With passage severely restricted, refiners are doing everything they can to find any available alternative sources of supply.

In addition, U.S. oil prices have nearly doubled since the beginning of the year. U.S. retail gasoline prices have broken above $4 per gallon, reaching the highest level since 2022, and inflationary pressures have risen as well. The sustained spike in oil prices is triggering market concerns that inflation may rebound while economic growth slows at the same time, leaving investors facing a more complex macro pricing environment.

(Editor: Wen Jing)

Keywords:

                                                            Oil prices