Middle East benchmark crude oil spot premiums surge as Red Sea route risks fuel supply concerns

(1) Due to the continued intensification of concerns over supply disruptions, spot premiums for Middle Eastern benchmark crude oils—Oman, Dubai, and Murban—rose again on Wednesday, reaching their highest levels in about seven weeks. (2) The risks on the Red Sea shipping route have become a direct trigger: three tankers carrying Saudi crude oil destined for Asia turned back in the Red Sea on Tuesday, opting to reroute via the Suez Canal instead of risking passage through waters near Yemen's coast. This decision was prompted by threats from Iran-backed Houthi forces to blockade the Bab-el-Mandeb Strait and their announcement to impose a maritime blockade on Saudi Arabia. (3) Crude oil transportation via the Strait of Hormuz is also expected to be delayed, as the U.S. military launched strikes against related targets for several consecutive nights. The ongoing tense geopolitical situation is making shipping decisions more conservative. (4) In the spot market, the premium for Cash Dubai over swap contracts has widened significantly, reflecting that the market pricing of physical crude shortages is accelerating the inclusion of geopolitical risk premiums.