Middle East Geopolitical Tensions Intensify, China's SC Crude Oil Futures See Significant Premium Over Brent and WTI

March 4th, News

March 4, influenced by the ongoing escalation of geopolitical conflicts in the Middle East, the international crude oil market experienced significant fluctuations. China's SC crude oil futures performed notably stronger than foreign markets, showing a substantial premium over both Brent and WTI, with the price difference reaching a recent high. This highlights the increased import costs and regional supply risk premiums.

I. Market Performance: SC Strongly Leads Gains, with a Significant Widening of Price Spread Between Domestic and Overseas Markets

As of the close on March 4th, the main contract for Chinese crude oil futures, SC2604, closed at 641.1 yuan per barrel, with a price increase of 13.99%, showing the strongest performance in the global crude oil market.

Converted at the exchange rate of RMB to USD mid-price of 6.9124 on that day:

SC crude oil price converted to U.S. dollars: $92.75 per barrel

Brent crude oil (May): $81.40 per barrel

WTI Crude Oil (April): $74.56 per barrel

Price difference result:

The SC premium over Brent is $11.35 per barrel.

The SC premium over WTI is $18.19 per barrel.

II. Core Logic of Water Price Increase:

Marine Freight Rates Soar, Pushing Up the Cost of Goods Arriving in China

The VLCC shipping price from the Middle East to China has surged significantly to $11–12 per barrel, becoming the most critical support for the SC premium and directly increasing the cost of imported crude oil for China.

Geopolitical risk pricing divergence

Shipping through the Strait of Hormuz has been disrupted, affecting approximately one-fifth of global seaborne crude oil trade. Given China's high import dependency, market concerns about supply disruptions are even more pronounced, driving SC price increases far beyond those in overseas markets.

Recent months have shown a strong structure with clear support for delivery.

The near-month contract for SC crude oil is further reinforced by tight logistics and a constrained supply of deliverable grades, thereby strengthening the contango structure in the near month.

III. Market Impact and Key Areas of Focus for the Future

The current crude oil market has shifted from being fundamentals-driven to geopolitics-driven, with the significant premium of SC reflecting China's advance pricing of potential disruptions to Middle East shipping routes and higher landing costs.

Future key areas for close monitoring include: the navigation situation in the Strait of Hormuz and the progress of resuming oil tanker shipments, as well as developments in U.S. policy toward Iran and whether the conflict will further escalate.