"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 tough remarks, which have shattered market expectations that the fighting will soon be over, the global physical crude oil market is experiencing the most severe price shock in more than 18 years.

On April 2, the spot price of Brent crude touched $141.37 per barrel, the highest level since 2008. Compared with the previous day’s price level of more than $128, the price surged sharply; this price also exceeded the peak seen when the Russia-Ukraine conflict broke out in 2022.

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

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

The price gap between physical oil and futures widens sharply

Spot Brent crude is one of the most important crude oil pricing benchmarks in the world and is widely used to guide pricing for roughly two-thirds of the world’s physical crude oil trading. Unlike Brent futures traded on the Intercontinental Exchange, spot Brent reflects the actual transaction price of North Sea spot cargoes—that is, the price of physical cargo 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 exceptionally wide. This gap stems from the fact that the pricing logic in the physical market and the futures market is fundamentally different: the former directly reflects the degree of scarcity of barrels available for delivery, while the latter is mainly driven by financial trading—more of the price is determined by “paper barrels” rather than physical barrels.

The spot premium in the North Sea region has climbed to historical highs in recent days. Traders are competing to bid for every batch of cargo they can obtain, which is the core force supporting spot Brent’s divergence from the futures track and its rapid upward surge.

WTI near-month spreads hit a historic record; supply tightens

Tensions in the U.S. crude oil market have escalated sharply in parallel. The WTI near-month spread—i.e., the price difference between the two most recent expiring contracts—expanded at one point on Thursday to more than $16 per barrel, 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. As a result, the near-month spread has widened dramatically.”

When the price of near-month contracts is far higher than that of deferred contracts, the market typically interprets it as pricing for extreme tightness in near-term physical supply. Traders said 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 snapping up large quantities of U.S. crude oil, and the market expects 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 carries nearly one-fourth of the world’s oil and natural gas transportation volumes. With passage severely restricted, refiners are scrambling to find any alternative sources of supply that are available.

In addition, U.S. oil prices have nearly doubled since the beginning of the year. U.S. domestic gasoline retail prices have surpassed $4 per gallon, reaching the highest level since 2022, and inflation pressure has risen accordingly. The sustained surge in oil prices is 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: Wenjing)

Keywords:

                                                            Oil prices