When the market is focused on US-Iran negotiations, an oil battle is unfolding: "There will be a huge crude oil gap in the coming weeks."

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While investors remain fixated on fragile ceasefire talks over Iran, a completely different storm is sweeping through the global physical oil market—a panic-driven race for barrels sparked by supply cuts through the Strait of Hormuz, spreading from Asia to Europe and the Atlantic basin.

According to a Bloomberg report on Saturday, the North Sea physical crude market saw 40 bids but only 4 offers this week, pushing near-term delivery crude prices briefly above the historical high of $140 per barrel. Meanwhile, the futures market tells a very different story—Brent crude futures for June delivery fell 13% this week, closing at around $95 per barrel. The more than $30 spread between the two markets reveals a deep disconnect between physical supply and paper market expectations.

Abu Dhabi National Oil Company CEO Sultan al Jaber wrote on LinkedIn, “The last shipments transiting the Strait of Hormuz before the conflict are gradually arriving at their destinations, exposing a very real 40-day gap in global energy flows.”

Traders warn that even if negotiations progress this weekend and the Strait reopens, crude from the Persian Gulf will still take weeks to reach Asian and European refineries, making the supply gap difficult to close in the short term. Macquarie has warned that if the conflict drags into June, oil prices could break through $200 per barrel.

Physical vs. Futures: Two Completely Different Worlds

The world’s most important physical crude benchmark—Dated Brent—hit an all-time high of $144 per barrel this week, surpassing the 2008 record, even though futures prices remain far below historic levels. As of Friday, Dated Brent had fallen back to $126 per barrel but was still more than $30 above the June futures price.

This massive spread is especially extreme in the North Sea physical market. Media reports say traders like Trafigura Group and Gunvor Group are bidding for North Sea crude loading in late April or early May at prices over $22 above Dated Brent. Next month’s Nigerian cargoes are offered at premiums of up to $25 per barrel, compared with less than $3 before the Iran conflict erupted.

Neil Crosby, Head of Research at Sparta Commodities AS, said, “It’s simply a shortage of crude oil. The physical Brent market is in total chaos, and prices have gone too high. If this continues, European refineries could be forced to cut operating rates as soon as next month.”

Asian Refiners Chase Barrels at Any Cost; U.S. Exports Hit Record

Asian countries most dependent on the Strait of Hormuz are scouring every possible source globally. Japanese refiners have launched a buying spree in the U.S., even hiring smaller tankers to transit the Panama Canal and shorten shipping times, while Indian refiners are ramping up purchases of Venezuelan crude—shipments for the first week of April are close to 6 million barrels, about double the same period in March.

Some Asian refinery traders said, they no longer care about the price; securing any barrels available, wherever possible, is all that matters to ensure energy security.

On the U.S. side, Trump said on social media this weekend that a “large number” of tankers are heading to the U.S. for crude loading. Houston Midland WTI (MEH) crude’s premium over the U.S. benchmark has risen to nearly $4 per barrel, about four times pre-war levels.

Refineries Under Pressure, Product Markets Worsen

The extreme spread between physical crude and futures prices is putting enormous financial and operational pressure on refineries. Since spot crude procurement costs are much higher than prices available for hedging in the futures market, refinery accounting profits look strong, but actual cash flow management faces severe challenges.

Midhurst Downstream consultant and former Aramco refining economist Roberto Ulivieri said, “This is a massive price risk management problem—their book profits look good, but the real cash flow from buying a cargo and then refining it could be drastically different.”

Some refiners have begun withdrawing from the market, directly resulting in lower output and further tightening product supply. Jet fuel and diesel prices have now surged beyond $200 per barrel, hitting all-time or near-record highs. U.S. government data shows gasoline inventories have fallen to their lowest level in nearly 16 years.

Shockwaves Spread "East to West", U.S. May Be Next Under Pressure

According to a JPMorgan analyst note on March 26, disruptions in oil flows through the Strait of Hormuz over the past four weeks are set to create “sequential” global shocks—starting in Asia, then Africa, then Europe, and finally reaching the U.S., with most regions expected to feel the brunt in April. The Philippines has declared an energy emergency, while Africa in early April and Europe in mid-April have also come under supply pressure.

The global oil system is shifting from a “flow shock” to a “stock drawdown problem.” Timing, rather than just total supply, has become the key variable driving the market.

Macquarie commodity strategists wrote in a client note that the market still expects Trump to quickly announce a breakthrough in negotiations but assigns about a 40% probability to a scenario where, if the conflict drags into June, oil could reach $200 per barrel and U.S. gasoline retail prices could spike to around $7 per gallon.

Energy Aspects co-founder Amrita Sen warned, “The physical market doesn’t take cues from social media—it is strengthening as supply outages spread from Asia to the Atlantic basin. If futures prices can’t catch up to reality in the physical market, U.S. exports could remain elevated as long as shipping capacity allows—until domestic refiners themselves face crude shortages.”

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