Basrah crude discount nears $10 a barrel as Brent hits highest level since May
Key Facts
Iraqi Basrah Medium crude was sold at a discount of nearly $10 a barrel to the Dubai physical benchmark, after offers a month earlier were close to parity, according to a Bloomberg report cited by Rigzone. The deal involved transferring oil from one ship to another in the Gulf of Oman. In the futures market, Brent reached $114.72 a barrel during Friday’s session, its highest level since May 4, according to Reuters. Brent was on track for a third straight weekly gain of nearly 4%, while West Texas Intermediate was headed for a weekly decline of 0.8%. Warren Patterson of ING said the rise in futures was not driven by fundamentals at the time, adding that the market “is trading on supply risks.”
The divergence between the price of the physical cargo and futures reflects a market shaped at once by the movement of physical oil and the risks of its delivery. Reuters linked Brent’s rise to concerns about disruption to energy supplies from the Middle East following Houthi attacks in Saudi Arabia. The agency reported that Aramco ordered its Dhahran headquarters evacuated on Thursday. Meanwhile, The Associated Press reported that oil tankers continued transiting the Strait of Hormuz under U.S. military protection, then transferring cargoes to other tankers waiting in the Gulf of Oman to ship them to buyers in Asia. The agency said the tankers use a protected corridor near Oman’s coast, while switching off positioning systems and phones during transit.
Tanker traffic in the Gulf continues amid elevated security risks. The Associated Press reported that Lloyd’s List Intelligence data counted 28 attacks on ships in October, the highest number since the war began. Even so, the agency said active Gulf operators “show little sign of retreating.” Ship-to-ship transfers in the Gulf of Oman illustrate a route tankers use to deliver oil to Asian customers after it passes through the Gulf. This traffic comes as prices for physical cargoes, including Basrah crude, diverge from the direction of futures, which moved on supply risks. Patterson did not link the rise in futures at the time to underlying market fundamentals, but to concerns about sustaining flows as attacks resumed.
Saudi Arabia has strengthened an alternative route for moving crude away from the Strait of Hormuz. Aramco’s chief executive said the East-West pipeline’s capacity had risen from 2 million barrels per day to 7 million barrels per day. This coincides with a partial recovery in Gulf exports: the International Energy Agency said exports from regional producers, led by Saudi Arabia, rose by 4.4 million barrels per day in September to 13.9 million, exceeding 75% of pre-war levels. But the agency warned in its report that new attacks threaten the recovery in supplies. Pipeline and export flows remain part of the risk landscape monitored by traders, while the Basrah deal showed a discount to the Dubai physical benchmark. Brent’s rise during the session, meanwhile, was linked to concerns about continued supply disruption, according to coverage cited by Reuters.
Official forecasts point to divergent paths for supply, demand and prices in the coming quarters. The U.S. Energy Information Administration estimated that the average spot price of Brent would be $105 a barrel in the fourth quarter of 2026, up $14 from its forecast the previous month. It also estimated that average shut-in oil production in the region fell to 4.8 million barrels per day in September, from 5.8 million in August, after reaching a peak of 10.9 million in May. By contrast, the International Energy Agency expects global oil demand to fall by 2.5 million barrels per day year over year in the fourth quarter, and by an average of 2.6 million in 2026. It expects global oil use in 2027 to remain 620,000 barrels per day, or 0.6%, below the 2025 level.
The Energy Information Administration’s 2027 forecast assumes that most of the region’s production will return to its pre-conflict average by the end of the second quarter. On that assumption, the agency expects the average spot price of Brent to reach $87 a barrel in the second quarter of 2027, then $74 in the fourth quarter. The estimates tie the subsequent price path to a return of production, while shipping developments and attacks continue to influence near-term supply concerns. In the nearer term, Brent was at its highest level since May 4 during Friday’s session and was on track for a third consecutive weekly gain, according to Reuters. Tankers continue to move oil through the Strait of Hormuz and then onto ships waiting in the Gulf of Oman to carry it to Asia, according to The Associated Press.