Reduced supply of crude from Iran and Russia has prompted a rally in the prices of crude from the Middle East, where some grades have soared to rarely seen premiums over the global benchmark, Brent.
The Murban crude futures from the United Arab Emirates (UAE), for example, have outperformed Brent over the past two months, traders have told Bloomberg.
In addition, the prices of Oman and Dubai crude jumped to a rare premium over Brent in recent weeks, as demand for Middle Eastern oil has increased in China and India, key Iranian and Russian buyers, amid lower supply from Iran and Russia.
Iran’s oil is increasingly finding its way into floating storage offshore Southeast Asia instead of at customers as a recent raft of U.S. sanctions on tankers shipping Iranian oil has made Chinese buyers more careful.
In October, the United States began ratcheting up sanctions on entities and vessels transporting Iranian oil. Two months ago, the U.S. Treasury and State Department designated several companies, based in Suriname, India, Malaysia, and China, for “knowingly engaging in a significant transaction for the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran.”
The new U.S. sanctions on Iran “include measures against the “Ghost Fleet” that carries Iran’s illicit oil to buyers around the world,” National Security Advisor Jake Sullivan said.
Russian supply has dwindled, too, with Russian crude oil exports by sea dropping as Moscow has been under increased pressure to fall in line with its OPEC+ quota as part of the group that looks to support oil prices. Increased sanctions pressure on Moscow’s “shadow fleet” of tankers has also played a role in reducing Russian shipments.
Saudi Arabia has regained some market share from Russia in Asia as the Kingdom’s exports rose, while Russia’s crude sales in the world’s most important oil-importing region fell amid lower purchases by Moscow’s two key markets, China and India.