"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 that have shattered market expectations that the fighting would soon end, the global physical crude oil market is experiencing the most severe price shock in more than 18 years.

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

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

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

The gap between physical oil prices and futures prices widens sharply

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

On Thursday, spot Brent rose to $141.37, while Brent futures that same day were still trading around $107. The spread between the two was extraordinarily 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 available for delivery today, while the latter is mainly driven by financial trading—pricing more of “paper barrels” than physical barrels.

The spot premium in the North Sea region has climbed to record highs in recent days. Traders are competing to bid for every batch of cargo that can be obtained, which is the core driver supporting spot Brent’s deviation from the futures track and its rapid rise.

WTI near-month spread hits a historic record; recent supply is tight

Tensions in the U.S. crude oil market are also ramping up sharply in parallel. The WTI near-month spread—i.e., the price difference between the most recent two expiring contracts—expanded at one point on Thursday to more than $16 per barrel, the largest premium on record.

Frank Monkam, macro trading director at Buffalo Bayou Commodities, said, “The war premium after Trump’s speech is concentrating in near-month contracts, so the near-month spread has therefore widened sharply.”

When near-month contract prices are far higher than forward contract prices, the market typically interprets that as pricing for extremely tight near-term physical supply. Traders noted that this surge is driven by two forces working together: first, short positions betting on a quick end to the fighting are being forced to cover; second, buyers in Asia and other regions have been snapping up U.S. crude in large quantities, and the market expects U.S. crude supply over the coming weeks to be significantly tightened.

The Strait of Hormuz has been blocked for more than a month. The strait accounts for nearly one-quarter of the world’s oil and natural gas transport, and passage has been severely restricted, prompting refiners to scramble to find any available alternative sources of cargo.

In addition, U.S. oil prices have nearly doubled since the beginning of the year. U.S. retail gasoline prices have surpassed $4 per gallon, reaching the highest level since 2022, and inflationary pressure has risen as well. The continued surge in oil prices is triggering market concerns 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