Analysis: Supply Crunch to Stay Despite Crude Spreads Ease


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- A prolonged supply disruption is taking shape for Middle 
East oil, even if the Iran war is to come to a quicker-than-thought end as U.S. 
President Donald Trump suggests.

   Crude futures rapidly declined on Tuesday (3/10), with West Texas 
Intermediate crude falling to $80 bbl and North Sea Brent to the low $90s, 
after both reached four-year highs of nearly $120 just a day earlier.

   Prompt spreads also retraced their extreme highs as the market sentiment 
shifted from panic to a more measured outlook on current supply and demand 
balances.

   WTI's prompt spread has more than halved from the intraday high of $6.07 bbl 
recorded early Monday (3/9) as buyers became more cautious about sustaining 
those elevated price levels.

   The spread between the first and second month delivered Brent, which 
rocketed to an intraday high of $9.38 bbl in the previous session, has dropped 
to around $4. The compression reflects a cooling in the aggressive buying 
behavior that previously dominated the market's front-end structure following 
the initial reports of supply issues.

   The pullback signaled some optimism in the market that the intense, 
near-term tightness stemming from the initial cessation of global oil flows 
could ease if trade routes stabilize.

   Yet, there was no sign yet of an imminent all-clear on the Strait of Hormuz, 
the Middle East's busiest shipping lane for petroleum, with Iranian national 
security chief Ali Larijani's warning there will be no safe passage on the 
waterway until U.S.-Israel attacks against Iran ceased.

   This indicates that the decline in oil prices is driven by speculative 
cooling and political headlines rather than any real-time improvements to the 
situation on the strait.

   Most oil exports from the Middle East are loaded onto tankers in the Persian 
Gulf before navigating their way through the strait. The halt of tanker traffic 
on the chokepoint led to quickly filling storage tanks, forcing producers to 
halt operations.

   Iraq, where northern oilfields were shut down in the first days of the war, 
has halted more than two thirds of production at its southern fields. Kuwait, 
Saudi Arabia and the United Arab Emirates also had to throttle output amid 
swelling inventories and attacks near energy infrastructure. The longer the 
strait remains untraversable, the longer wells will stay idle, which could 
prolong the time needed to restart production.

   News of Group 7 nations discussing releasing crude oil from their strategic 
reserves in coordination with the International Energy Agency pumped the brakes 
on soaring time spreads. Finance ministers from the developed countries' club 
met Monday to discuss a potential release of 300 million to 400 million bbl 
from their 1.2 billion bbl collective emergency reserves, saying necessary 
measures will be made according to market requirements.

   Despite the pullback, the crude market's backwardation remains historically 
steep, with WTI's prompt spread near $2.50 bbl and Brent's around $4 bbl.




(c) Copyright 2026 DTN, LLC. All rights reserved.