Iran conflict boosts U.S. gulf oil prices to highest since 2020

Iran Conflict Sends U.S. Gulf Oil Prices Soaring to 4-Year High

By Siddharth Cavale

U.S. Gulf Coast Heavy Crude Prices Surge Amid Middle East Tensions

NEW YORK, March 6 (Reuters) - U.S. Gulf Coast heavy grades continued to surge on Friday as the Iran conflict spurred several Middle Eastern producers of heavy crude to curtail production and drove buyers to scoop up U.S. barrels.  

Mars Sour Crude Hits Record Premium

Prices of Mars sour crude, the flagship crude produced in the U.S. Gulf of Mexico and favored by refiners globally, traded at a $11 premium to U.S. benchmark West Texas Intermediate (WTI) crude on Friday, brokers said. That was the highest since April 2020, and up $4 from Thursday.

Rapid Price Increase Over the Past Week

Just a week ago it traded at a premium of $1.50.

Other U.S. Heavy Grades Also Rise

Other heavy grades such as the Heavy Louisiana Sweet and the West Texas Sour also rose.

Global Oil Market Reaction

Benchmark crude oil prices have surged since the initial attacks last week, with Brent crude settling at $92.69 a barrel, its highest level since October 2023 on Friday.

Strait of Hormuz Closure Impacts Supply

The effective closure of the Strait of Hormuz has forced several countries, including Iraq, to curb output. The strait is a key route for medium and heavy sour crude from the Persian Gulf, and those flows are now largely cut off. Additional production cuts announced in Kuwait on Friday also helped lift Mars prices, a trader said.

Refiners Seek Alternatives Amid Supply Disruption

“Refiners that rely on these grades will need to find similar, or roughly similar, alternatives to replace the lost barrels, so Mars and other U.S. Gulf sour heavies and mediums are natural substitutes and are getting bid up aggressively,” Kpler lead Americas oil analyst Matt Smith said, adding that buyers, especially in Asia, are scrambling for more of these medium and heavy crude barrels. 

Seasonal Factors and War Drive Demand

"This time of year also marks the shift from winter into driving season, when demand typically rises across all crude grades," said Tim Snyder, chief economist at Matador Economics, adding that ultimately the supply disruption caused by war was driving prices.   

"In the short term we will continue to see these grades rise until we see the Strait of Hormuz open up," Snyder said.

(Reporting by Siddharth Cavale in New York and Georgina McCartney in Houston; Editing by David Gregorio)