Rabobank says oil futures are failing to capture mounting supply threats from the Middle East, even as physical crude prices spike and global logistics come under strain.
Futures calm, physical market stressed
Global strategist Michael Every of Rabobank argues that futures curves are acting as if the Iran conflict and disruptions in the Strait of Hormuz have largely stabilized. He says this contrasts with spot market dynamics, where buyers seeking immediate delivery are paying sharply higher prices.
A widening gap has opened between paper and physical markets. Dated Brent, the benchmark for prompt North Sea cargoes, has at times traded more than $20 a barrel above futures. Physical prices for European delivery are reported to be surging towards $150 a barrel, while Brent futures remain closer to $95.
Every says this suggests those needing oil now face a far tighter reality than the derivatives market implies.
Record supply shock centered on Strait of Hormuz
The immediate driver of the divergence is what Rabobank describes as the largest oil supply disruption in history. Global supply in March is estimated to have fallen by 10.1 million barrels per day.
The bottleneck is the Strait of Hormuz, a key chokepoint that usually handles about one-quarter of the world’s seaborne oil. Daily tanker transit volumes through the strait are reported to be down by as much as 93% from normal levels, leaving roughly 1,000 ships waiting in the region.
While a two-week ceasefire between the United States and Iran is being discussed, Rabobank notes that the strait remains effectively under Iranian control, keeping uncertainty elevated for flows and insurance costs.
Range of scenarios from U.S. “victory” to extended blockade
Every outlines scenarios ranging from a U.S. “victory” over Iran by mid-April to prolonged maritime blockades that could keep global energy markets constrained for months.
He argues that downside geopolitical risks are still influencing physical flows and pricing but are largely absent from futures valuations, creating a disconnect between what is traded on screens and what is occurring on the water.
Structural flaws in pricing models
Rabobank suggests that the gap between market pricing and geopolitical developments points to deeper structural shortcomings in oil pricing models.
According to Every, current mechanisms may be underestimating the likelihood that severe supply shocks become a semi-permanent feature of the global energy landscape, rather than short-lived disruptions.
This concern is reinforced by inventory physical stocks outside the Middle East are reported to have declined by about 205 million barrels in March alone, reducing the buffer available to absorb fresh shocks.
Australia refinery fire exposes local vulnerabilities
The global tension is being amplified by localised disruptions. In Australia, a large fire at the Geelong refinery, one of only two oil refineries in the country, has sharply reduced petrol output for the state of Victoria and the wider national market.
The facility accounts for around 10% of Australia’s fuel production. The outage has deepened an existing diesel shortage, raising the risk of interruptions to mining operations and equipment supply chains that underpin a significant share of the country’s industrial activity.
Europe faces policy split amid rising energy bill
In Europe, the European Commission has urged member states not to stockpile fuel, despite earlier downplaying regional supply risks. Brussels is preparing proposals to change energy taxation, seeking to accelerate the shift away from fossil fuels.
The bloc’s fossil fuel import bill has already risen by more than €22 billion since the latest Middle East conflict began.
However, several member states are moving in the opposite direction, cutting fuel taxes to ease pressure on households and businesses. Rabobank notes that such cuts can blunt incentives to reduce consumption, complicating attempts to manage demand during a tight supply period.
Demand outlook flipped as IEA revises forecasts
The International Energy Agency (IEA) has responded to the turbulence by revising its medium-term projections. It now expects global oil demand in 2026 to be 80,000 barrels per day lower than previously, a sharp reversal from earlier forecasts that had anticipated growth.
Every argues that market participants who rely mainly on futures prices may be misreading these shifting fundamentals. In his view, the combined impact of record supply disruptions, falling inventories, refinery outages and policy uncertainty is not fully reflected in the comparatively calm derivatives market.
He warns that this misalignment leaves traders exposed to sudden repricing if further shocks hit already strained physical supply chains.
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