European crude physical, paper markets hit all-time highs on volatile supply outlook

Fresh uncertainty regarding the European supply outlook ahead sent physical differentials for both light sweet and medium Atlantic basin crude segments to fresh record highs on March 19, with their corresponding Brent-linked derivatives surging to similar heights in response.

The scramble by Europe-based refiners for barrels amid a tight April supply balance and elevated product margins had already pushed all segments of the physical European complex to multi-year highs in the March 18 session.

Notably, market participants said chatter regarding potential disruptions to the availability of US crude exports during the March 19 session further stoked shortage fears -- although the Trump administration confirmed that the US does not plan to restrict crude or natural gas exports during late afternoon European trading.

The additional uncertainty has clouded an already volatile supply outlook, particularly across the European light sweet complex, with market participants citing loading disruptions to exports of the critical Kazakh grade, CPC Blend.

"The uncertainty is the only certain element," a Europe-based Mediterranean crude oil trader said, adding that indicative levels were "all over the place currently."

As a result, differentials in the Mediterranean continued to tick higher on March 19, with indicative levels from market participants suggesting further upside risk.

Platts, part of S&P Global Energy, assessed Azeri Light crude cargoes on a CIF Augusta basis at a $8.70/barrel premium over Dated Brent on March 19, up $1.60/b on the day. This marks its highest level since July 22, 2022.

Kazakhstan's CPC Blend CIF Augusta also continued to rise, reaching a new all-time high of a $3.05/b premium -- the highest on record since the assessment was launched.

Meanwhile, North Sea crude differentials saw all six Dated Brent basket grades rise to multi-year highs amid a largely sold-out April program, with the Dated Brent physical differential more than doubling on the day.

While market participants had been eyeing potential arbitrage flows out of the North Sea into Asia over recent sessions, differentials in the North Sea had risen, which should keep Asia-based buyers out of the market, a Europe-based North Sea crude trader said.

"Forward margins do not justify paying super crazy high numbers," the trader added.

In the West African medium crude segment, sentiment remained firm, with adjacent market strength and sky-high refinery margins buoying demand for the region's exports.

Platts assessed flagship Nigerian grade Bonny Light at a two-year high of a $3.05/b premium to Dated Brent on March 19.

The spot market remained fairly thin, however, with trading currently being dominated by buy tenders in Asia. Grades Forcados, Agbami and Qua Iboe were heard sold to Indian and Indonesian buyers in recent days.

"There's no doubt that the Nigerian market is moving a lot higher given what has been going on, but everyone is keeping cards close to their chest," one West Africa-based trader said.

Brent-linked derivatives breach record highs

Responding to the strength in the physical markets, various Brent-linked derivatives surged to record highs against a backdrop of ICE Brent futures volatility.

The front-month Dated-to-Frontline contract, currently April, rose to its highest level on record on March 19 since Platts began the assessment in 2000. The DFL represents the spread between the ICE Brent frontline swap and Dated Brent.

Platts assessed the front-month DFL contract at $6.94/b on March 19, up 84 cents/b day over day. Prior to the onset of the conflict, the April contract was assessed at 37 cents/b on Feb. 27.

Outright values for Brent Contracts-for-Difference, representing the perceived value difference between Dated Brent and forward Cash BFOE across individual weeks, also continue to hover around their highest value since 2022.

Notably, the structure across the North Sea Dated strip -- corresponding to the Brent CFDs settling across weeks 2 to 6 -- widened to its highest backwardation since August 2022 and the second-widest backwardation on record since Platts began the assessment in 1999.

Combined with the ongoing rally in ICE Brent futures, the Dated Brent global crude benchmark rose to its highest value since July 2022. Platts assessed Dated Brent up $4.905/b on the day at $117.435/b on March 19, with the benchmark having risen over $46/b from the end of February.