The Middle East crude market
weakened sharply this week, slipping into discounts, Reuters
data showed, after the United States and Iran agreed a framework
deal to reopen the crucial Strait of Hormuz, brightening the
global supply outlook.
With Asian refining demand led by China still subdued after
months of run cuts, hopes of higher supply after the deal pushed
Dubai and other Middle East benchmarks into contango and opened
rare arbitrage opportunities to Europe and the United States.
Benchmark Dubai’s premium to swaps slipped into a discount
of 46 cents on Tuesday, the first contango structure since
January, Reuters’ data showed, after hitting pre-war levels of
$2.06 per barrel on Monday.
Contango is a market structure in which prompt cargoes trade
at a discount to later-dated ones, indicating ample supplies.
Similarly, spot Oman, Murban differentials flipped into
discounts of 67 and 49 cents, respectively on Tuesday.
Spot premiums for Dubai and Oman hit record highs of more
than $60 per barrel while Murban’s peak was more than $50 in
March after the conflict disrupted supplies.
“While practical timelines for the reopening remain
uncertain, an estimated 4 million barrels per day of crude was
already navigating the waterway prior to the diplomatic
breakthrough,” said Kpler’s senior crude oil analyst Naveen Das.
“A formal reopening will unleash millions of barrels
currently trapped in floating storage, directly inflating the
physical volumes that dictate the Dubai benchmark and applying
intense downward pressure on regional pricing.”
Before its closure, the Strait carried about a fifth of
global supplies of crude oil and liquefied natural gas.
The Dubai benchmark has been weakening since April as
elevated crude costs curbed buying interest from Asian refiners,
prompting run cuts and higher purchases of alternative grades
from regions such as the United States.
Ahead of the signing of a preliminary agreement between the
U.S. and Iran to end their conflict, some Middle Eastern
producers managed to export some oil out of the strait, which
eased supply tensions.
Abu Dhabi National Oil Company (ADNOC) has sold at least 30
million barrels of spot crude to Asian refiners and trading
firms so far this month and offered more this week.
ARBITRAGE TO US, EU OPEN
The collapse in Middle East crude prices has also reopened
arbitrage opportunities to destinations beyond Asia.
About four to five Very Large Crude Carriers carrying Abu
Dhabi’s Murban and Das crude were heading to Europe, according
to one trader，who added that the cargoes belong to Exxon Mobil
. Each VLCC can carry 2 million barrels of oil.
Another trader estimated 13 million to 15 million barrels of
Middle East crude, including Upper Zakum, Murban, Oman and Iraqi
Basrah Medium, are being shipped to the U.S. and Europe by oil
majors Exxon and TotalEnergies.
The companies typically do not comment on commercial deals.
The shipments became economical for Europe after weak Asian
demand and falling Middle East crude premiums narrowed the price
gap with competing Atlantic Basin supplies, traders said.
Murban has become cheaper than U.S. West Texas Intermediate
crude (WTI) for European buyers as demand in Asia is weak, two
traders said.
The arbitrage for U.S. WTI to Asia has also closed since
early June, traders said, putting pressure on the U.S. benchmark
grade.
WTI Midland in west Texas flipped on Tuesday to trade at a
premium to the same grade in Houston for the first time since
late May, as export demand slipped on a rapidly closing
arbitrage window.
Published on June 17, 2026
