Physical oil traders desperate for crude as risks multiply

Bloomberg

From Colombia to the North Sea, the Middle East to Texas, the global market for crude cargoes is becoming tighter as supplies grow more constrained and risks to production spiral.
Prices for actual barrels from the North Sea, Asia, and the Americas are now trading at the highest in half a decade. Key price spreads that show how urgently oil refineries need benchmark Brent barrels are soaring.
It’s little wonder. The list of known supply curbs and disruptions is growing, and traders now also have to contend with mounting tensions in the Persian Gulf — the world’s largest export region. Drone attacks temporarily halted a giant Saudi Arabian pipeline. Two days before that, four oil tankers were sabotaged at the key refuelling port of Fujairah
in the UAE.
“We have now reached the stage where crude differentials globally and across all slates are strong,’’ said Greg Newman, co-CEO of Onyx Commodities, which special-ises in energy derivatives. “There is only one conclusion: the prompt market is short of oil.
With the current situation, the outright price should continue to strengthen until demand suffers.”
In the US, Heavy Louisiana Sweet crude rose to the highest since 2014. HLS is now the most expensive crude in the Gulf Coast complex. Buyers in America are seeking to substitute the loss of sanctions-hit Venezuelan supply and production curtailments from Canada.
Brent crude futures for July are now trading close to $3.40 a barrel more than futures for December, the highest premium in the life of those two contracts, according to ICE Futures Europe data. That means traders are willing to pay more to obtain supplies as soon as possible.
That same strength is also showing up in North Sea derivatives markets. Contracts for difference have been trading in a backwardated structure — meaning more immediate prices are higher — that has strengthened markedly over the past two weeks, according to PVM Oil Associates data.