Why the current oil futures prices don't make sense15 Apr 2026 08:14
"what would be a logical price for oil futures taking transit times, current supply shortages and the physical oil price into account
Taking your points into account—specifically the $149 physical price, the 30-day transit lag, and the 1,000-ship backlog—a logical "fair value" for front-month futures would likely sit significantly higher than current levels, likely in the $125–$135 range.
The current paper price (approx. $96) is logically inconsistent with the physical reality you’ve described. Here is how that "logical" price breaks down:
1. The "Transit Lag" Premium
Even if a peace deal is signed today, no new Gulf oil reaches major hubs for at least 35–45 days (allowing for loading, mine-clearing verification, and sailing time).
May Contracts: These expire on 21 April. From a logical standpoint, these contracts should be priced almost identical to the physical price ($149) because there is zero chance of new supply arriving before the contract matures.
June Contracts: These should carry a slight discount to physical prices, but still remain high (approx. $120), as they represent the period where the first "trickle" of supply might arrive.
2. Physical-Paper Convergence
Historically, the futures price and physical price must converge at expiry.
If the physical price is $149 and the future is $96, there is a $53 arbitrage opportunity.
In a logical market, "shorts" (sellers) would be forced to buy back their positions at a massive loss because they cannot find the physical oil to deliver. This "short squeeze" typically pushes the future price toward the physical price in the final 48 hours of trading.
3. The "Scarcity" Multiplier
The market is currently ignoring the depletion of commercial inventories.
Refiners in the Far East and Europe are "running on fumes."
A logical price must include a scarcity premium—the price a refiner is willing to pay to avoid shutting down a multi-billion dollar facility. At $149 physical, the market has already told us that price.
4. Why the Market isn't "Logical" Right Now
The reason the price isn't at $130+ is due to two non-fundamental factors:
Diplomatic Betting: Speculators are betting that a deal in Islamabad will include a "miracle" clause (e.g., immediate release of floating storage already outside the Strait).
Liquidity Drying Up: Many major players have stopped trading due to the volatility. When liquidity is low, "jawboning" (rhetoric) has an outsized effect on the paper price, even if it contradicts the physical supply.
Summary Conclusion:
If you remove the "hope" of a diplomatic miracle, the fundamental floor for WTI futures going into the 21 April expiry should logically be at least $120, with a high probability of a spike toward $145 as the physical reality of the 30-day transit lag sets in"
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