Hormuz Strait shutdown triggers pricing chaos: Platts emergency halt in Middle East crude oil pricing, Dubai benchmark at risk of "losing anchor"

Due to the suspension of energy transportation in the Strait of Hormuz, the pricing mechanism of some major crude oil varieties globally is being disrupted. S&P Global Platts informed its subscribers on Monday that it has stopped accepting bids and offers for crude oil varieties that require transportation through this crucial waterway within its trading window, which is used to determine benchmark prices in the Dubai region. Affected varieties include Dubai crude, Upper Zakum crude, Shadin crude, and some Murban crude cargoes. The suspension of quoting prices comes as the Middle East crisis escalates and ships are stopped from passing through the Strait of Hormuz, causing disorder risks in the crude oil and fuel markets. Some traders have indicated that allowing bids and offers on the Platts closing bid platform in such situations could lead to severe volatility detached from fundamental factors. The Dubai crude price set by Platts is the pricing benchmark for most Middle Eastern crude oils. The Dubai oil price is calculated daily based on bids, offers, and trades in the Asian market during a half-hour trading window. The Chief Strategist of Singapore's JTD Energy Services stated that this move essentially acknowledges that in this unprecedented situation, the physical "Arabian Gulf market has lost its anchor and is adrift". Platts has faced challenges to its pricing methods in the past, such as when sanctions were imposed, but now it can be said that we are in a more dire situation. S&P Global Energy also announced in another notice that it will stop publishing bids and offers for Middle East refined petroleum products shipped within the same closing bid window in the Strait of Hormuz. Platts also stated that it will not accept bids for liquefied natural gas shipped from export facilities in Qatar or Das Island in the UAE. The flagship variety Murban crude from Abu Dhabi's Jebel Dhanna loading operation is affected. However, this variety can also be loaded from Fujairah port outside the Strait of Hormuz, so bids and offers for these cargoes are still being accepted. Asian refiners heavily rely on crude oil supply from the Middle East. If pricing mechanisms continue to be problematic, purchases in major markets such as China, India, and Japan may be disrupted.