Oil prices in the Middle East took a significant hit as the prospect of increased supplies from OPEC+ triggered a market selloff. Oman crude, traded on the Gulf Mercantile Exchange, slipped below the price of Brent for the first time since late 2024, marking the end of the Middle Eastern crude’s extended premium over the global benchmark since 2023.
OPEC+ recently announced plans to revive halted production in phases starting in April, which could eventually increase supplies by more than 2 million barrels per day. This move surprised many analysts and led to a decline in oil futures, exacerbating existing market concerns, especially amid escalating global trade tensions.
Traders have raised alarms over the potential oversupply from OPEC+’s planned production increases, combined with uncertainties about the U.S. stance on sanctions against Russia. Additionally, despite ongoing sanctions, crude supplies from Iran and Russia continue to reach Chinese buyers, though not without some logistical challenges.
Key indicators of market health, such as the timespreads of Dubai crude, also showed signs of weakness. The price difference between the second- and third-month Dubai contracts shrank to just 38 cents, down significantly from $2.55 in late January, signaling a decrease in concerns about tight oil supplies.
Earlier in the year, U.S. sanctions on Russian and Iranian oil led to a scramble for alternative supplies, driving up prices for Middle Eastern crudes. However, that rally has not been sustained, and prices are now falling, with Dubai’s weaker performance compared to Brent causing the difference between the two to widen significantly. The East-West Spread (EFS) — a key benchmark for the price difference between Brent and Middle Eastern crude — has increased to 84 cents per barrel, up from 31 cents just a week earlier.
This weakening of Middle Eastern oil prices has effectively closed off the window for arbitrage opportunities, where oil traders would purchase cargoes from Europe or the U.S. to sell them in Asia, according to Neil Crosby, an analyst at Sparta Commodities.
Overall, rising production from OPEC+ and the shifting dynamics of global sanctions have led to significant volatility in the oil market, particularly affecting prices in the Middle East.
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