Global Market | Vital oil benchmarks say a different story

Asia's oil refiners are seeking alternatives to the Middle East's benchmark crude prices, as war-driven distortions fuel wild price swings that they say have come untethered from physical market realities.

The Middle East's key benchmarks have become increasingly erratic as the war creates a shortage of the barrels used to assess prices for the region, while a buying spree by France's TotalEnergies SE has added to the turmoil. At one point, Oman crude traded close to $170 a barrel, prompting concerns in Wall Street that the oil shortage was in reality worse than it looked - before prices crashed back down again.

Refiners in Asia, which use the Oman and Dubai benchmarks as a reference level for the purchase of billions of dollars of Middle East crude each month, are now struggling to navigate a pricing system many view as broken. While much of the region's production is shut inside of the Strait of Hormuz, the benchmarks are still needed to value the roughly five million barrels a day of oil that continues to flow from Saudi Arabia and the United Arab Emirates via pipelines to outside the Gulf.


Speaking privately, about 20 traders and officials from refiners across the world's biggest oil-consuming region said they no longer view the Middle East's key price benchmarks as reliable, exacerbated by a lack of liquidity. Several said they were concerned that the system may take time to return to normal even after the conflict ends.

"The fallout from the conflict in the Middle East is no longer confined to damaged infrastructure and disrupted supply lines," Societe Generale analysts including Michael Haigh said in a note. "It's now distorting the region's key crude benchmarks and ensnaring Asia's refiners."