Alex Kimani
In a “perilous position,” the Platts Dubai benchmark, which used to price around 18 million barrels per day, nearly a fifth of global supply, is now severely strained by the halt in exports through the Strait of Hormuz. According to Reuters, with most cargoes having been unable to move safely through the chokepoint, the system is grappling with a fundamental question of how to price oil that cannot be loaded. The situation remains largely unchanged as of today, despite Washington’s announcement that the Strait is officially open for business again. The Platts Dubai benchmark depends on crude produced in the UAE, Oman, and Qatar, much of it loaded within the Strait. But since the outbreak of conflict, tanker traffic has slowed dramatically, leaving the benchmark disconnected from physical reality. Platts has responded by cutting deliverable grades from five to two--Murban and Oman--reducing supply in the pricing basket by roughly 40%.
Market participants have told Reuters the benchmark is “effectively broken,” with some stepping back from trading Dubai-linked cargoes or derivatives altogether. Others are shifting activity toward exchange-based mechanisms, particularly Murban Futures on IFAD, where pricing continues to function even as physical-linked benchmarks come under strain.
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