Why are Oman oil prices going at a premium amid the global supply crunch and Strait of Hormuz crisis

The global oil market is going crazy right now because of the ongoing Iran war, and prices are shooting up fast. US oil prices have reached around $97 per barrel, which is a huge 76% jump since December. At the same time, physical oil prices in Oman have gone super high, touching around $167 per barrel — that is a massive 72% premium.

Oman crude oil prices recently hit around $152.58 per barrel, the highest level seen since 2008, as stated by The Kobeissi Letter on X. The main reason is simple: Oman oil is one of the few Middle East oil supplies that can still move easily right now. A big problem started when the Strait of Hormuz got closed due to the war, which blocked a major global oil route.

Oil supply cut big time

This closure has cut off about 20% of the world’s oil supply from reaching global markets. Because of this, buyers around the world are rushing to find replacement oil supplies. This sudden panic buying has pushed prices up for oil not just in Oman but also in countries like Norway and Kazakhstan, as cited by Financial Times. Oman oil became extra valuable because it can be exported from ports outside the blocked Strait of Hormuz.

Due to limited supply, buyers are fighting to get whatever oil is still available from Oman. Experts say the main reason behind the price jump is “pure shortage” of actual physical oil in the market, as per David Fyfe, Argus Media via Financial Times . Refineries are now looking for oil that is similar to Middle East crude, increasing demand for such types globally.

Transport costs going up

Oil types from Algeria, Libya, Norway, and Kazakhstan are also becoming expensive because they are being used as substitutes. Some industries like petrochemicals are facing shortages because their raw material shipments are stuck in the Gulf, as cited by Financial Times. Transporting oil has also become very expensive due to high demand for tankers, longer routes, and rising fuel costs.

Even if alternative oil is available, many refineries are scared to switch because it might affect their production, as per Philip Jones-Lux, Sparta Commodities via Financial Times. Older refineries in countries like Japan, Thailand, Indonesia, Vietnam, and Singapore may struggle more with switching oil types. Because of all these issues, the cost of crude oil for Asian refineries has almost doubled since before the war.

Paper vs real oil prices gap widens amid supply crisis

There is also a big gap now between “paper oil prices” (like Brent and WTI) and real physical oil prices. Brent and WTI prices are not rising as much because they track a different type of oil (lighter and low sulphur). The oil stuck in the Gulf is heavier and more sulphur-rich, which makes it harder to replace. Experts say the Hormuz crisis mainly affects oil flows to Asia, where there are very limited backup options, as per Ivan Mathews, Vortexa via Financial Times.

Another reason is timing — futures prices (like Brent) are for later delivery, while physical oil is needed immediately. Traders believe supply might improve later, so futures prices are not rising as sharply. Right now, the market is clearly split — paper market and physical market are behaving very differently, as per Ole Hansen, Saxo Bank via Financial Times.

Experts are calling this one of the biggest oil supply disruptions since the 1970s. Final simple reason: Oman oil is expensive because it is available, transportable, and in short supply when the world badly needs it, as per the report by Financial Times.

FAQs

Q1. Why is Oman oil so expensive right now?

Oman oil is costly because supply is low, demand is high, and it can still be transported despite the Strait of Hormuz crisis.

Q2. Why is there a gap between Brent prices and real oil prices?

Brent prices are for future delivery, but real oil is needed now, so physical prices are much higher due to shortage.