StanChart Warns Physical Oil Premium Collapse May Be Temporary

Standard Chartered analysts predict that the recent sharp decline in physical oil cargo premiums is likely temporary, despite current market adjustments. Following a surge in premiums driven by fears of supply disruptions from the Iran conflict and the blocking of the Strait of Hormuz, prices for prompt crude barrels had spiked significantly, with North Sea Forties reaching nearly $150 per barrel. However, premiums have recently collapsed, with some grades dropping by up to 90%, as buyers exercised restraint, utilized strategic inventories, and sourced supplies from non-disrupted regions. Dated Brent premiums fell sharply, settling just above front-month futures. StanChart attributes this correction to deferred purchases and high volatility risks but warns that prices will likely rise again once inventory buffers are depleted and refinery runs increase, unless a diplomatic resolution to the conflict is reached. This reversal could eventually pull futures prices upward toward elevated physical benchmarks, challenging the recent trend where physical trading prices dropped relative to futures.