Physical Oil Prices Surge to Two-Month Highs on Middle East, Black Sea Supply Disruptions

Physical crude oil prices surged to two-month highs this week, with some grades nearing $110 per barrel, as escalating geopolitical conflicts in the Middle East and the Black Sea triggered significant supply disruptions and sent buyers scrambling for alternative cargoes.

Key Benchmarks Reflect Tightness

The price increases were evident across several key global benchmarks for physical oil, which is traded for immediate delivery. The tight market conditions pushed spot premiums for Middle Eastern grades to their highest levels since the end of May.

Key price movements include:

• Dated Brent, the benchmark used to price more than 60% of the world's physical crude, reached $105.70 per barrel on Thursday, its highest point since late May, according to LSEG data.
• North Sea Forties crude, a grade priced against Brent, climbed even higher to $108.77 on Friday.
• Spot premiums for Middle East benchmark Dubai to swaps doubled on Thursday to $12.74 per barrel, while Oman’s premium rose to $12.62, Reuters data showed.

Dual Supply Shocks

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The rally is being driven by simultaneous disruptions in two critical oil export regions. In the Middle East, attacks by Yemen's Iran-aligned Houthis on tankers in the Red Sea have forced some Saudi Arabian shipments to take a longer, more costly route around Africa. These events follow the collapse of a preliminary U.S.-Iran peace deal, increasing uncertainty around the vital Strait of Hormuz.

Meanwhile, in the Black Sea, Kazakhstan announced on Thursday that it had reduced oil production. The cutback was forced by the closure of its primary export terminal for CPC Blend crude, which occurred after suspected Ukrainian drone attacks, according to reports.

What This Means for the Market

The concurrent supply shocks are tightening the physical oil market, where actual barrels are bought and sold. The sharp rise in premiums for grades like Dubai and Oman indicates that refiners are competing aggressively for available cargoes to meet immediate processing needs.

These developments suggest a more constrained near-term supply outlook than may be reflected in futures markets alone, as logistical challenges and geopolitical risk directly impact the availability and cost of physical oil shipments.