As grim as some of the headline oil prices look now, other gauges in the energy market actually look a lot worse.
That’s as crude futures have been volatile since the U.S.-Israeli war on Iran started, soaring some days while also retreating on President Donald Trump’s attempts to talk down the market.
But with one-fifth of the world’s oil supply still largely bottled up in the Persian Gulf, which provides more than 80% of Asia’s energy supplies, shortages are worsening and getting hard to stave off with contingency measures.
“Short-term measures like emergency stockpile releases and removal of sanctions on Russian and Iranian oil on water have been exhausted,” Ben Cahill, director for energy markets and policy at the University of Texas at Austin’s Center for Energy and Environmental Systems Analysis, posted on X on Wednesday.
“Unless Strait of Hormuz transit resumes, the stress in refined products and the shortages we’re seeing across Asia will spread, and quickly. We are Wile E. Coyote running off the cliff into midair,” he added.
The mismatch was on display Thursday, when the spot price for physical cargoes of Brent crude oil hit $141.36 a barrel, the highest level since 2008, while the futures contract for June delivery was $32.33 lower at $109.03.
Countries in Asia are already scrambling to ration energy supplies. South Korea imposed a fuel price cap, the first in 30 years. Thailand has capped diesel prices, instructed officials to work from home, and urged citizens to wear short-sleeve shirts. Bangladesh has imposed daily fuel purchase limits and closed universities early.
Meanwhile, countries are competing furiously for the oil supplies that are available. In one instance, a tanker headed for India changed course for China. Russian oil is also in high demand after the U.S. temporarily lifted sanctions, with the Philippines, Indonesia, Thailand, and Vietnam signaling interest.
Analysts warn it’s just a matter of time before the energy crisis reaches other parts of the global economy. Shipments that departed the Gulf just before the war began have only now reached their destinations, and only a trickle of tankers have transited the Strait of Hormuz since then.
The futures price is “almost giving a false sense of security that things are not that stressed,” Amrita Sen, founder of Energy Aspects, told CNBC on Thursday.
“We’ve never seen the financial market and the physical market disconnect for so long,” she added. “Ultimately they have to coincide.”
The new normal in the oil market—whatever it eventually becomes—will not be the same as the prewar status quo, with the floor for prices rising to at least $70 to $80 a barrel but probably closer to $100, Sen predicted.
Cahill also expressed puzzlement that headline oil prices haven’t shot up even higher yet, adding that they don’t tell the full story of stress in energy markets. But that’s going to change in the coming month, he told DW News on Friday.
“We’ve essentially burned through all the buffers and the short-term emergency measures that are available,” Cahill explained. “And as long as we have 10 million barrels a day–plus of oil that is disrupted through the Strait of Hormuz, the toll on energy prices is expected to grow.”
