Murban Crude Surges Nearly 4% to Match Brent as Gulf Attacks and Iran Ship Claims Stoke Supply Fears

The price of Murban crude, the flagship oil grade produced by the United Arab Emirates, jumped nearly 4% on Friday, outpacing other benchmarks as escalating attacks in the Persian Gulf region heightened concerns about supply from the Middle East.

Murban rose $4.20, or 3.81%, to $114.40 a barrel, matching the price of Brent crude, the global benchmark, which gained about 1% to $114.40. U.S. West Texas Intermediate crude rose 1.4% to $100.90.

The surge made Murban the biggest gainer among major crude benchmarks on Friday.

What is Murban?

Murban is a light, low-sulfur crude oil produced by Abu Dhabi National Oil Co., or ADNOC, the state oil company of the UAE. It is prized by refiners for its quality, which makes it easier to process into high-value fuels such as gasoline and jet fuel.

Murban futures trade on ICE Futures Abu Dhabi and serve as a key price marker for Middle Eastern crude sold to Asia, the region's largest export market. Its price is closely watched by refiners in countries such as Japan, South Korea, India and China.

Gulf tensions escalate

Murban's rally came as tensions in the Gulf region intensified. Saudi Aramco ordered staff to evacuate its headquarters in Dhahran, in Saudi Arabia's Eastern Province, after attacks by Yemen's Iran-aligned Houthi rebels. One person was killed and eight injured in an attack on King Fahd International Airport, according to Saudi civil aviation authorities.

Iran's Revolutionary Guard navy separately claimed that four vessels involved in what it called illegal oil transfers had been hit in the northern Persian Gulf and that three more ships had struck mines west of the Strait of Hormuz. The claims could not be independently verified.

"Markets are increasingly worried about renewed escalation in the Persian Gulf," ING analysts Warren Patterson and Ewa Manthey wrote in a note, adding that reports suggested President Donald Trump was considering fresh strikes on Iran.

Because Murban is produced in the Gulf region and sold heavily to Asian buyers, its price can be particularly sensitive to threats to Gulf shipping and supply.

A volatile year

Murban has experienced sharp swings this year as conflict in the Middle East has disrupted energy markets.

Prices surged earlier this year when disruptions in the Strait of Hormuz peaked, and Murban traded above $120 a barrel in late September, according to media reports. In early October, Murban reached $110 a barrel while Brent traded just above $102, reflecting a wide premium for the Middle Eastern grade.

In August, Murban hit a four-month high after ADNOC cut the volume of crude it offered to Asian buyers in spot tenders by about 5% because of maintenance at some onshore fields in Abu Dhabi. At that time, Murban traded nearly $7 above Brent, the widest premium since early April, according to Oilprice.com.

Friday's jump erased the discount Murban had been trading at against Brent in recent sessions, bringing the two benchmarks level.

ADNOC pricing

ADNOC sets an official selling price for Murban each month based on the futures market. The company raised the official selling price for October to $90.58 a barrel, according to Reuters. Since then, futures prices have risen sharply, reflecting the escalating tensions.

Impact on Asia

Higher Murban prices are likely to raise costs for Asian refiners, which rely heavily on Middle Eastern crude. Countries such as India, Japan and South Korea import large volumes of oil from the Gulf and are especially vulnerable to supply disruptions in the region.

Rising crude costs could eventually feed through to higher fuel prices for consumers and businesses in Asia, adding to inflation pressures in the region's economies.

Strategic importance

The UAE has invested heavily in making Murban a global benchmark, partly by developing export capacity at the port of Fujairah on the Gulf of Oman. Fujairah lies outside the Strait of Hormuz, allowing some UAE crude exports to bypass the narrow waterway.

That geographic advantage has made Murban an important source of supply for buyers concerned about disruptions to shipping through Hormuz.

What's next

Traders will watch developments in the Gulf closely, including any further attacks on energy infrastructure or shipping and the risk of renewed military action involving Iran.

ADNOC's next official selling price announcement and any changes to its supply allocations to Asian buyers will also be closely followed. Any easing of regional tensions could quickly reverse the latest rally, while further escalation could push prices higher still.