Oil prices have moved higher over recent weeks, but the response from the physical market has been noticeably restrained. Flat price strength has not been matched by enthusiasm among traders, and that gap matters. In physical markets, conviction shows up in spreads and flows, not headlines.
Much of the recent price support has been driven by uncertainty and rumours, particularly around geopolitics. Traders are watching those developments closely, but they are not treating them as a reason to aggressively reprice the market. The prevailing mindset remains “buy the rumour, sell the fact.” Until something tangible changes, many participants see limited upside from current levels.
From a fundamentals perspective, the market still looks relatively well supplied. That is reflected most clearly in regional crude spreads. Earlier in the year, grades such as Oman and Murban were trading at sizeable premiums, signalling tightness. Those premiums have since eroded sharply as additional supply has returned to the market, particularly following OPEC’s gradual unwinding. Brent now trades at a clear premium to Oman, with Murban closer to parity, a meaningful shift in structure.
Spreads Matter More Than Sentiment
These changes in spreads tell a more important story than the headline price. They indicate that physical balances are loosening, even as flat prices remain supported by uncertainty. If the current period passes without material disruption, many traders believe the market looks expensive relative to underlying fundamentals.
History reinforces that caution. Previous geopolitical shocks have produced far larger and more sustained price moves than has been seen recently. An oil price rally of around ten percent suggests the market is still betting on containment rather than escalation. For now, the physical market is signaling restraint. Prices may be supported by risk, but conviction is limited. Unless rumours turn into facts, traders expect fundamentals to reassert themselves.