Crude producers offer steep discounts to offset higher transport costs, keeping Gulf oil moving amid geopolitical risks.
TotalEnergies CEO Patrick Pouyanne said oil continues to flow through the Strait of Hormuz, despite a $30 per barrel discount below Brent. The discount reflects seller desperation rather than a temporary market dislocation, capping potential upside for Brent prices even as shipping risks persist.
The dynamic highlights a split between bearish crude markets and bullish refined products, where transport costs remain prohibitive. This divergence could sustain elevated crack spreads as long as the strait remains constrained. TotalEnergies remains a major trader of Iraqi and Qatari crude, adapting to the new pricing environment.
Producers are investing in alternative pipeline routes, signaling expectations that Hormuz risks will persist for years. The market has adjusted to the geopolitical premium, though at a significant cost to sellers.