American crude oil prices have skyrocketed to unprecedented heights as refineries worldwide engage in fierce competition for supplies, following disruptions to Middle Eastern oil shipments due to ongoing regional conflicts, according to industry experts.
While European nations traditionally purchase the majority of American crude exports, the competition has intensified dramatically as Asian buyers aggressively seek alternative sources from the Americas, Africa, and Europe to compensate for Middle Eastern oil that cannot pass through the Strait of Hormuz.
The surge in oil costs is creating significant financial strain and expanding losses for refineries across both continents, according to sources and market analysts. This pressure is particularly severe for government-owned companies mandated to maintain fuel production for national security purposes.
“Asian refiners, shut out of Middle Eastern supply, are bidding aggressively for every available Atlantic Basin barrel,” said Paola Rodriguez-Masiu, chief oil analyst at Rystad Energy, in a note dated April 3.
Market traders report that West Texas Intermediate Midland crude bound for North Asia in July on large tanker vessels now commands premiums between $30 and $40 per barrel, depending on the pricing benchmark used.
One trading professional valued the premium at $34 per barrel compared to Dubai pricing, while another placed it at $30 per barrel above dated Brent. Two additional sources indicated offers have approached $40 per barrel over an August ICE Brent reference point.
These figures represent a significant increase from premiums of approximately $20 per barrel for transactions completed in late March and early April, when Japanese refineries including Taiyo Oil acquired WTI crude, traders noted.
“Every day there’s a new price,” one of the traders said, adding that Asian refiners face severe losses from the premiums.
Another market participant suggested refineries might benefit more from reducing crude processing and purchasing refined products instead, if suppliers are available.
The premium surge occurred after the immediate monthly spread for WTI futures reached its most extreme backwardation on Thursday, a market condition where current prices exceed future month values.
Increased discounts on American crude compared to the global Brent benchmark have also boosted demand for shipping vessels along the U.S. Gulf Coast, limiting tanker availability in the area and elevating transportation costs.
In European markets, purchase offers for WTI Midland delivered to the continent rose to an unprecedented premium approaching $15 per barrel against dated Brent on Thursday.
“At current physical differentials and freight rates, European refiners buying spot crude cannot make money running those barrels through their systems,” Rodriguez-Masiu said.
