Persian Gulf Oil Exports Surge as Physical Prices Collapse

Physical oil prices are collapsing as crude exports from the Persian Gulf return to pre-war levels, shifting the market from a bidding war to a surplus. Combined exports from Saudi Arabia, the UAE, Iraq, and Kuwait rose 10% in October to over 15 million barrels per day.

This surge has caused physical premiums to plummet. The premium of Dated Brent over ICE futures dropped from $30 per barrel in early October to approximately $3.70. In West Africa, Nigerian and Congolese cargoes are seeing steep discounts or remaining unsold, while the Dubai benchmark has flipped into contango for the first time since July.

A significant disconnect persists between physical supply and financial futures, which remain above $100 per barrel. Goldman Sachs estimates a geopolitical risk premium of $27 is keeping futures high as traders hedge against Middle East escalations. This tension is exacerbated by reports from the Islamic Revolutionary Guards Corps Research and Self-Sufficiency Jihad Organization that three tankers exploded after hitting naval mines in the Strait of Hormuz. Iranian official Mohsin Rezaee has rejected the U.S. position on the nuclear file and demanded seven conditions be met before reopening the strait.