European crude benchmark North Sea Dated has surged to its highest price since late July 2022, as the supply crunch from the Mideast war has engulfed Europe.
Dated hit $112.83/bl on 18 March, up by $10/bl from the previous session and more than $40/bl higher than in late February, before the war in the Mideast Gulf broke out.
The last time he Atlantic basin benchmark was anywhere close to this level was in late July 2022. At that time Europe was bracing for a shortage and a significant shift in crude flows due to sanctions on supply from Russia after it attacked Ukraine.
Dated reflects the price of light sweet crude in Europe. The benchmark is used to trade crude grades produced in Europe, Caspian countries, north and west Africa, as well as the Americas. It also underpins Ice Brent futures.
The fallout from the Mideast war was slower to manifest in Europe than in Asian markets, as the supply disruption to European refiners was slightly delayed by longer shipping times. Europe is still receiving some last cargoes of Iraqi Basrah grades that departed before Hormuz was shut and are sailing around the Cape in South Africa. And Saudi crude travelling to Europe does not have to pass the strait of Hormuz, so flows to the region are so far largely unaffected.
Some traders also noted that the price of Dated had been capped by sales of prompt March cargoes of benchmark grades, which set Dated.
Vitol, which was due to receive several physical cargoes of benchmark grades in March in a settlement of North Sea forward positions, publicly sold six shipments of US WTI this week, all for delivery in last days of March–first days of April. Most European refiners would have secured supplies for those dates some weeks prior, and buying supply for storage has been highly uneconomical due to wide backwardation.
Prices that Vitol's cargoes fetched were $3-4/bl below prices that refiners said they were paying for later deliveries.
Low differentials for unwanted prompt cargoes briefly pressured Dated, but once those were placed, Dated has started rising. Some market participants think that Dated will further extend its gains, as it is still more than $45/bl below the Dubai benchmark.
Refiners in Europe increasingly voice concerns that the current crude prices are unsustainable in the midterm. Refinery cracks in the region are steeply backwardated. While wide cracks for key oil products in April still allow for high feedstock costs, sharply lower May cracks could lead to a reduction in refinery runs, unless crude prices ease, traders said.
