Market News

Since Donald Trump sent bombs raining down on Iran, the global oil price has almost become his personal yo-yo, rising and falling at his beckoning.

The pattern is set: when the benchmark Brent crude oil price climbs above $100 a barrel, Trump will issue a Truth Social post or a sound bite down the phone to a journalist that pushes the price back down again.

At other times, the US president drives the price higher as he threatens to wipe out entire civilisations in an effort to force Iran to strike a deal.

“Traders used to spend their time looking at the fundamental supply and demand in the market. Since the war broke out, they basically focus on a screen with all the social platforms and tweets from Donald Trump,” says one market analyst.

In a sense, the oil price has become a live referendum on the likelihood of peace. It is now one of the most closely watched financial instruments in the world – but traders say the world is watching the wrong price.

While Brent futures, the most widely quoted price, can tell us what investors think about the future path of the war, it does not reflect the physical reality of the energy crisis engulfing the world.

“We’re all a bit surprised that the broader financial markets are so relaxed about all this. The people at the coalface are much more concerned,” says one commodity trader.

“We’ve always said to each other, ‘What’s the worst thing that could happen to the oil market? Closing the Strait of Hormuz’. And now here we are.”

There is a price that reflects a global oil market that has already lost perhaps one billion barrels of crude supply. But it’s not Brent futures, it’s Brent Dated.

This is the price paid for a barrel of oil that is about to be loaded on to a tanker. In other words, it is the price of getting your hands on a consignment of crude today – not months in advance, as the futures price measures.

Unlike the Trump-fuelled gyrations in benchmark Brent futures, the Dated price has been grinding relentlessly higher since the war began.

On Feb 27, a barrel of Dated Brent cost $70.83, slightly below the benchmark futures price of $72.46. By early April, the benchmark was at $109.27 but the Dated price had spiralled to $144.46.

The gap has narrowed since then, but it’s still there and it’s still well outside the norm. Trump’s latest preference for negotiations about war has kept the benchmark price just below $100 but the Dated price is stuck at $108.

“The Dated contract is extremely high. It’s priced the highest I’ve ever seen it in my 10 years as a trader and it’s because of the supply constraints,” says Manny Newman, of Onyx Capital.