Crude markets in the Mediterranean have become much tighter this month, with premiums on two of the most closely watched crude grades in the region surging well beyond the benchmark and suggesting that the shift in the way that European refiners procure their energy is here to stay. The cause of the situation is, of course, well known: the war in the Gulf.
Azerbaijan’s Azeri BTC and Kazakhstan’s CPC Blend, two of the most popular crude grades with European refiners, have recorded sizeable increases in recent weeks, with traders pointing to a mix of geopolitical events, logistical disruption, and the structural shift in the way that European refiners procure their energy away from the Middle East.
A supply glut triggered by the Iran conflict has, counterintuitively, pushed premiums higher relative to Brent, as refiners scramble for reliable and geographically accessible barrels. European oil and refined product prices have climbed steadily since the start of the month, driven by buyers seeking alternatives to Middle Eastern grades amid ongoing regional unrest.
CPC Blend has undergone a particularly notable reversal. Having traded at discounts of up to five dollars per barrel in previous months, March and April cargoes were last week priced at premiums of one to two dollars per barrel over Brent, according to market participants. The turnaround reflects tightening availability driven by adverse weather, drone activity in the Black Sea, and operational issues at Kazakhstan’s Tengiz field, one of the largest oil developments in the region. For now, the sharp rise in premiums signals the growing strategic relevance of the Caspian basin in an increasingly fragmented global energy system.
Security concerns in the Black Sea have added a further layer of uncertainty to CPC supply chains. Over the weekend, a Greek-operated tanker bound for the Caspian Pipeline Consortium terminal sustained minor damage after being struck by an unidentified object. While the incident did not significantly disrupt flows, it underscored the growing risks facing energy transport routes in the region.
Rising insurance and freight costs linked to such incidents are capping the upside for CPC premiums, traders say, even as demand remains robust. Cargo availability has tightened further, as most April-loading shipments have already been sold, leaving only a limited number of late cargoes on offer. Volatility in cargo scheduling continues to weigh on trading dynamics despite improved export flows.
In contrast to CPC Blend, Azeri BTC has benefited from relatively stable export flows, allowing it to command significantly higher premiums. April cargoes are currently trading at five to six dollars per barrel over Brent, with some deals reportedly concluded at levels as high as eight to nine dollars per barrel as buyers compete to secure supply. The Iraqi government has recently chosen to restart oil shipments through the pipeline to the Turkish port of Ceyhan. The restart follows coordination between the federal government and the Kurdistan Regional Government, enabling crude to flow again through one of Iraq’s main export routes. Operations at the Saralo pumping station have also resumed.
Initial export capacity is set at 250,000 barrels per day, with authorities highlighting the move as both a technical and administrative achievement.
Which means the supply will increase significantly. Perhaps, infrastructural risks remain, as the war in Iran continues, given the fact that we have seen several claims saying drones are trying to blow up this pipeline at the start of the war.
The grade’s appeal lies in its low sulphur content and compatibility with European refining systems, making it a preferred substitute as traditional supply channels from the Middle East face disruption. The State Oil Company of the Azerbaijan Republic has played a central role in maintaining steady export volumes through the Baku-Tbilisi-Ceyhan pipeline, which remains a critical artery linking Caspian resources to global markets.
Recent developments in Kazakh oil transit further underscore Azerbaijan’s growing role as a regional energy hub. Cooperation between SOCAR and Kazakhstan’s KazMunayGaz has enabled the continued transportation of Kazakh crude via the Caspian corridor, with transit volumes reaching 4 million tonnes and reflecting a steady expansion of the Aktau-to-Ceyhan route.
Kazakh oil shipments, primarily from the Tengiz field with smaller volumes from Kashagan, are transported across the Caspian Sea to the Sangachal terminal before being fed into the BTC pipeline and exported to international markets. Since its launch in 2006, the pipeline has transported approximately 619 million tonnes of crude oil, reinforcing its position as a cornerstone of Eurasian energy infrastructure.
The recent rise in premiums paid for Mediterranean crude oil is an example of the structural change in the European oil supply. As tensions in the traditional oil supply chain continue to rise, alternative sources closer to home are becoming an increasingly important part of the mix. Caspian oil is an important part of this emerging pattern, which would have been unimaginable prior to the period of sustained instability in the region.
However, the situation is fluid and subject to change. Instability in the Black Sea region and the Middle East means that oil markets in the region are unlikely to be without their share of volatility in the near future. What is certain is that the Caspian oil basin has emerged as the focal point in the region, moving from the periphery to the center of the oil supply chain.