Heavy crude grades originating from the U.S. Gulf Coast climbed sharply on Friday as conflict linked to Iran prompted several Middle Eastern heavy crude producers to cut output, redirecting demand toward U.S. barrels.
Traders reported that Mars sour crude - the leading U.S. Gulf of Mexico heavy stream preferred by global refiners - changed hands at an $11 premium to U.S. benchmark West Texas Intermediate (WTI) on Friday. That premium represented the highest level since April 2020, rising $4 from Thursday. By comparison, a week earlier Mars had traded at a $1.50 premium to WTI.
Other U.S. heavy grades also strengthened, with Heavy Louisiana Sweet and West Texas Sour posting gains as buyers sought alternatives to displaced Persian Gulf flows.
Global benchmarks reflected the same pressure. Brent crude settled at $92.69 a barrel on Friday, the highest settlement since October 2023, as the market adjusted to the sudden drop in regional exports.
Market participants attributed much of the shift to the effective closure of the Strait of Hormuz, a principal transit route for medium and heavy sour crude from the Persian Gulf. The disruption has forced a number of countries, including Iraq, to reduce output. Separately, additional production cuts announced in Kuwait on Friday further tightened available supplies and were cited by a trader as a factor lifting Mars prices.
"Refiners that rely on these grades will need to find similar, or roughly similar, alternatives to replace the lost barrels, so Mars and other U.S. Gulf sour heavies and mediums are natural substitutes and are getting bid up aggressively," Kpler lead Americas oil analyst Matt Smith said, adding that buyers, especially in Asia, are scrambling for more of these medium and heavy crude barrels.
Seasonal demand dynamics were also noted as a contributing factor. "This time of year also marks the shift from winter into driving season, when demand typically rises across all crude grades," said Tim Snyder, chief economist at Matador Economics. Snyder added that the primary driver of the current price moves is the supply disruption caused by the conflict.
"In the short term we will continue to see these grades rise until we see the Strait of Hormuz open up," Snyder said.
With key Persian Gulf medium and heavy sour flows largely cut off, refiners that historically relied on those barrels are bidding for comparable U.S. Gulf streams. That shift has pushed premiums on Mars and similar grades materially higher over the span of a single week.
Market participants will be watching developments around the Strait of Hormuz and further announcements from regional producers for indications of how long the current dislocations may persist and which crude streams will remain in tight supply.