European and African crude oil prices surged to unprecedented levels this week, defying a sharp decline in futures markets following a landmark U.S.-Iran ceasefire agreement. The divergence underscores persistent supply chain disruptions and robust demand from refiners, highlighting a complex global energy landscape where geopolitical de-escalation has yet to translate into tangible market relief.
The ceasefire, announced on Tuesday, triggered a dramatic selloff in benchmark oil futures, with Brent and WTI contracts plummeting 13% and 16% respectively to below $100 a barrel. Investors initially bet on the reopening of the Strait of Hormuz—a critical chokepoint for global oil shipments—and a reduced geopolitical risk premium. However, physical crude prices have remained stubbornly high, with North Sea Forties crude reaching an all-time peak of $146.43 per barrel on Thursday, according to LSEG data.
Analysts attribute this gap to strong demand from Asian and European refiners for non-Middle Eastern barrels, coupled with expectations that supply disruptions will linger for months. “We are talking months before a return to the full supply chain, so certainly there will continue to be this big divergence between the physical and paper markets,” said Sparta Commodities analyst Neil Crosby. The ongoing near-closure of the Strait of Hormuz and attacks on regional energy infrastructure have exacerbated the situation, driving physical premiums to record highs.
In the North Sea, key grades like Brent, Oseberg, Ekofisk, and Troll all saw premiums hit fresh records on Wednesday. Forties crude traded at a record premium of $20.25 to dated Brent, while U.S. WTI Midland crude delivered to Europe reached an unprecedented $20.70 premium. These premiums are particularly significant because dated Brent—derived from North Sea crudes and WTI Midland—is used to price over 60% of globally traded crude, as noted by Reuters.
West African markets mirrored this trend, with Angolan Cabinda crude trading at around dated Brent plus $10 per barrel, a record high for the grade. Energy consultancy Energy Aspects cautioned that the ceasefire’s temporary nature—reportedly lasting two weeks—means operators are unlikely to restart refineries and fields due to risks of renewed shutdowns. This sentiment is echoed in broader market analyses, which suggest that physical flows and production will not see material changes swiftly.
The sustained price surge in European and African crudes reflects deeper structural issues in the oil supply chain, where logistical bottlenecks and regional instability continue to outweigh short-term diplomatic breakthroughs. As the global energy market navigates this precarious balance, stakeholders remain wary of volatility ahead. For ongoing coverage of international energy developments, refer to Al Jazeera.
Source: ARY News