Middle East Crude Prices Drop Despite Shipping Attacks

Physical prices for Middle Eastern crude oil sold outside the Persian Gulf have declined as producers and traders improve their ability to move cargoes through the Strait of Hormuz. This trend is most evident in Iraqi Basrah Medium crude, which now sells at a discount of nearly $10 per barrel to the Dubai benchmark, a sharp drop from near parity one month ago. Other grades, including Murban, Omani, and Khafji crudes, have also experienced price softening.

These physical price drops contrast with benchmark oil futures, such as Brent, which have risen toward $115 a barrel due to perceived supply risks. The market shift occurs as the war between the United States and Iran enters its eighth month. Iran has increased assaults on shipping ahead of the November U.S. midterm elections.

Despite the conflict and the shipping attacks, Donald Trump asserts that more crude is currently exiting the region than before the war began. To maintain flow, some producers have utilized ship-to-ship transfers in the Gulf of Oman to move Iraqi Basrah Medium crude outside the Strait of Hormuz.