Global physical crude markets mired in discounts as Middle East ramps up supply

• ADNOC has sold at least 48 million barrels for June-August loading as Middle East benchmarks Dubai, Oman, and Murban flip to steep discounts, with cash Dubai dropping from a $60 peak in March to a 27-cent discount by June
• Collapsing Gulf prices have reversed arbitrage flows, making Middle Eastern crude attractive to Europe while shutting the window for U.S. and Atlantic Basin exports to Asia, with U.S. crude exports to Asia set to fall in Q3 after hitting a record 2.634 million bpd in May
• Discounts have spread globally, with North Sea Forties trading at $1 below dated Brent (down from a $21.50 premium in April) and West African grades like Congolese Djeno hitting record lows at $10.80 discount to Brent

Summary: Global Physical Crude Markets Face Widespread Discounts Amid Middle East Supply Surge

Global crude oil markets are experiencing significant price pressure as Middle Eastern supply surges following a temporary U.S.-Iran sanctions reprieve. The 60-day interim deal, ending the conflict that began February 28, has reopened the Strait of Hormuz, which previously handled one-fifth of global oil and LNG shipments.

Key Price Movements:

• Cash Dubai crude dropped to a 27-cent discount per barrel from a $60+ peak in March
• Oman and Murban discounts widened to 96 cents and 67 cents respectively
• North Sea Forties traded at $1/barrel discount to dated Brent (lowest since November), down from April's record $21.50 premium
• Angolan Nemba sold at $7.95 below dated Brent; Congolese Djeno hit record low discount of $10.80

Supply Dynamics:

Abu Dhabi National Oil Co (ADNOC) sold at least 48 million barrels for June-August loading. Iran is ramping up exports beyond China, while Kuwait Petroleum and Iraq's SOMO have increased offerings. Asian refiners have already secured supplies through August, creating a contango market indicating oversupply.

Trade Flow Changes:

The collapse in Middle East prices has reversed arbitrage opportunities. Energy majors including ExxonMobil, Eni, and TotalEnergies are now shipping Gulf crude to Europe. Conversely, U.S. crude exports to Asia are expected to decline in Q3 after hitting a record 2.634 million barrels per day in May. U.S. WTI Midland flipped from premium to 45-cent discount.

Market Outlook:

Analysts note Europe is becoming the "clearing point" for displaced crude, while Atlantic Basin differentials are expected to soften further as Middle Eastern supply continues pressuring global markets.