Physical Oil Prices Surge to $112 as Divergence from Paper Futures Widens

Global energy markets are experiencing a widening gap between physical crude and paper futures, with physical barrels hitting $112 amid acute supply shortages. The conflict in the Middle East and the closure of the Strait of Hormuz have resulted in the loss of 500 million barrels of global oil supply over a seven-week period. This lost supply carries an estimated financial value of $50 billion, based on an average price of $100 per barrel. Prior to the war, the Strait of Hormuz handled 20 million barrels per day, highlighting the scale of the current disruption and the resulting $17 physical premium. Analysts emphasize that this deep backwardation reflects a supply crunch far more severe than what is currently priced into speculative contracts. The outlook remains bullish as long as vital maritime corridors remain blocked, keeping physical delivery constrained.