The Brent crude global benchmark has been whipsawed in recent weeks and months by geopolitical headlines and unexpected market events. But despite Brent’s dominance as a global price marker, it has become a poor gauge of the actual price many buyers are paying for oil. Differentials and discounts to Brent — particularly relative to Dubai medium, sour — are rising and falling on supply outages in some places and the buildup of shadowy sanctioned crude in others. With all the noise and geopolitical uncertainty, prices for different crudes have sometimes moved in radically different directions, with no one grade coming anywhere close to telling the full story. The global crude market has been fractured by wars, sanctions and supply swings, among other things. Term sellers like Saudi Arabia and the United Arab Emirates have cut official selling prices to multiyear lows, partly due to ample supply in Asia both on the regulated market and on “dark fleet” tankers looking for somewhere to unload their sanctioned crude. Venezuela’s return to the above-board market has eliminated these discounted barrels from China’s diet, leading refiners to find alternative barrels on the cheap. With more heavy, sour Venezuelan barrels available and priced at standard market rates, Canadian crude is under fresh pressure, particularly on the US Gulf Coast, as oil sands production continues to rise. This week, India promised the US it would stop importing Russian crude. Although many in India are skeptical this will come to pass, should Russia be forced to seek alternative buyers this could further blow out Urals’ discount to dated Brent beyond current levels of around $11 per barrel, as per Argus pricing for delivery to India.
