Physical oil prices hit record highs near $150 a barrel as Hormuz crisis worsens

European and Asian refiners are paying record high prices of near $150 a barrel for some crude oil grades, far exceeding prices for paper futures, highlighting the worsening supply crisis from the U.S.-Israel ‌war with Iran.

The ⁠Iran ⁠war has forced the shutdown of at least 12 million barrels per day – about 12% of world supply – ​from the Middle East due to Iran’s effective closure of the Strait of Hormuz. As a result, ​Brent oil futures reached $119.50 a barrel last month, the highest since 2022 although still short of the 2008 record high of $147.50. The nearby Brent contract is for June delivery.

Competition for supply ​from Asian and European refiners to replace disrupted Middle Eastern ⁠oil flows ‌has helped to drive up the prices of replacement crudes for ​more immediate delivery, such ​as those in Europe and Africa.

As a result, some crudes ⁠are hitting records already. The outright price of North Sea Forties ​crude reached $146.09 a barrel on Tuesday, according to LSEG data, ​above the 2008 level and an all time high.

The main driver of prices such as that of Forties is “panic” over supplies, said Adi Imsirovic, a veteran oil trader. “When there is a real, physical shortage, people are not thinking about July delivery – June loading and hence June futures prices – but oil NOW.”

The price of Forties and many other cargoes around the ‌world is linked to the physical crude benchmark called dated Brent which is trading almost $20 higher than the price of Brent futures for June ​delivery according to ​LSEG data because it ⁠reflects the price of cargoes for immediate delivery.

“At the moment, the market is scrambling for prompt, refinery-usable barrels, and stress is appearing first in the part of the benchmark that is closest to the immediate physical problem,” Morgan Stanley analysts said in a report.Prices of refined products in Europe were close to record highs on Tuesday.

Jet fuel prices in Europe hovered at $226.40 a barrel, close to a record high hit in mid-March. Diesel prices were still shy of their record highs hit in 2022, standing at $203.59 a barrel on Tuesday.