Brent’s $120 Physical Price Exposes a Squeeze Futures Are Missing

Oil buyers are facing a split market: Europe’s main benchmark for physical crude has climbed above $120 a barrel while Brent futures have eased toward $101. According to OilPrice (direct), the divergence points to a much tighter market for actual barrels than the futures price suggests. For governments trying to contain fuel costs, the challenge is no longer just price volatility. It is also how to keep supplies moving as export restrictions and attacks disrupt trade.

Dated Brent, the benchmark for crude traded for physical delivery, would normally help underpin ICE Brent futures, contracts for delivery at a later date. Instead, the two have moved in opposite directions. OilPrice’s October 2 report describes a volatile week shaped by drone attacks on tankers in the Strait of Hormuz, European diesel stock-release plans and China’s renewed restrictions on refined-fuel exports.

Fuel restrictions put reserves under pressure

China has suspended most refined-product export shipments for October, reinstating an earlier ban during the Golden Week holiday. Its diesel inventories are around 20 million barrels below pre-war levels, while gasoline stocks are 9 million barrels below their target. OilPrice reported that the restrictions drove a sharp rise in Asian refining margins—the difference between fuel prices and the cost of crude used to make them. Russia has also extended its diesel-export ban through October, withholding a share close to 10% of seaborne supply as winter demand increases. Deputy Prime Minister Alexander Novak suggested the restriction could soon be lifted as domestic supplies improve.

European governments are considering releasing 50 million barrels of diesel over 20 days, roughly 17% of the EU’s emergency diesel inventories. The final volume has not been confirmed. The proposal follows US President Donald Trump’s threat to ban diesel exports. Separately, the US Department of Energy has offered 40 million barrels of sour crude, a higher-sulfur grade, for delivery in November and December. That is the final offering in Trump’s 172-million-barrel emergency drawdown from the Strategic Petroleum Reserve, the government’s emergency oil stockpile.

The budgetary stakes are growing alongside the supply challenge. The United Nations Development Programme warned that subsidies could exceed $1 trillion in 2026 as the US-Iran war, oil above $100 and rising borrowing costs strain public finances. Government fuel relief is shielding 130 million people from falling below the poverty threshold of $6.85 a day, according to the warning reported by OilPrice.

The UNDP warned that subsidies could exceed $1 trillion in 2026 as war, expensive oil and higher borrowing costs squeeze government budgets.

More pipeline flows, but production remains constrained

Saudi Arabia offers one sign of improving supply routes. Flows through its restarted East-West pipeline have climbed to almost 6 million barrels a day, close to June-July levels. About 4.5 million barrels a day are available for export from the Red Sea. That restores a route around the Strait of Hormuz, although Houthi strikes continue.

Production remains another constraint. OPEC, the oil-producing group, is expected to leave November output targets unchanged at Sunday’s meeting. Its core producers are still pumping 5 million barrels a day less than before the war, despite the group’s August production rising by 630,000 barrels a day from July to 25 million barrels a day.

The next tests are whether Europe confirms its diesel release, Russia relaxes its export ban and OPEC keeps targets steady. Those decisions will come as the final US emergency crude offering moves toward delivery. Meanwhile, the gap between physical Brent and futures remains a visible sign of the strain facing buyers seeking actual oil.