Oil is trading below $90 per barrel in the futures market. In Sri Lanka, buyers pay $286.

Oil futures have traded in the $90 to $100 per barrel range this week.

But in the physical market – where refiners and traders buy real cargoes rather than paper contracts – prices have been dramatically higher, underscoring how tight real-world supply conditions still are despite the pullback in futures prices.

In Sri Lanka, buyers have reportedly paid up to $286 a barrel for immediate crude, while total loading costs to Singapore have been quoted as high as $210, HSBC CEO Georges Elhedery said earlier this week.

“What worries me is not the headlines,” Elhedery said, speaking at the HSBC global investment summit in Hong Kong on Tuesday. “The door-to-door barrel of oil, or the door-to-door barrel of refined oil, is well above the general price of oil.”

Oil futures contracts reflect a standardized delivery contract for a predetermined date in the future, and those contracts can be bought or sold without oil changing hands. In the physical market, the buyer pays a litany of fees on top of the oil itself, including freight costs, insurance, financing and shortage premiums.

Read more: You can trade oil futures. What to know before you start.

For buyers around the world looking for oil available for delivery as soon as possible after seeing their usual supplies from the Persian Gulf reduced to zero, the typical spread between physical and paper markets has become even more painful.

In mid-March, prices for Dubai crude and Oman crude – key benchmarks for buyers in Asia and other parts of the world dependent on Middle Eastern oil – rose as high as $169.75 per barrel, without taking into account any of the additional shipping costs in the physical market.

Dated Brent, the benchmark contract for short-term physical delivery of North Sea oil, hit an all-time high of $144 per barrel on April 7. Although the spot price has moderated to about $116 through Friday, it is still about $30 higher than the front-month Brent futures contract, compared to a typical spread of $1 to $2.

“Today’s much wider gap indicates the market is struggling to get barrels for delivery now, even if it still assumes supply will normalize later,” JPMorgan Chase strategists, led by head of global commodities strategy Natasha Kaneva, wrote in a recent client note.

“In that sense, the strength of Dated Brent is the market’s way of signaling that time has become a scarce commodity,” they wrote.

Read more: How oil price shocks impact your wallet, from gas to food

Positive headlines from the past have driven down prices in both the physical and paper markets. Israel and Lebanon agreed to a temporary 10-day ceasefire, taking pressure off a key point in negotiations between the United States and Iran, while President Trump said Iran had agreed to indefinitely suspend its nuclear program and a deal should be finalized in the coming days.

On Friday, Iranian Foreign Minister Abbas Araghchi announced that, given the ceasefire in Lebanon, passage through the Strait of Hormuz is “fully open during the remaining period of the ceasefire” for “all commercial vessels.”

However, nothing has changed structurally in the oil market to justify the price decline, JPMorgan strategists wrote. The US blockade of the Strait of Hormuz has further restricted global supply, cutting off the 2 million barrels per day of Iranian oil that had been flowing steadily even as other traffic had stopped and global inventories had shrunk.

“With supplies tight and inventories shrinking, physical prices should be rising, not falling,” JPMorgan strategists wrote. “The only way to reconcile lower prices with tighter fundamentals is weaker demand.”

In Europe, JPMorgan strategists note, demand destruction has already begun, sending the price of physical Brent contracts for short-term delivery from more than $140 a barrel in early April to $116 a barrel on Friday.

Read more: The price of oil at $100 could skyrocket airline ticket prices this summer. These tips could save you.

The prices that European refiners can charge for products such as diesel and jet fuel have fallen below the cost of crude oil and processing, strategists say, forcing refiners to cut production and reduce their crude purchases.

Still, prices may have room to rise further, said Janiv Shah, vice president of oil commodity markets at consultancy Rystad Energy.

Even given the plethora of positive headlines, Shah said, the on-the-ground response from shipowners is likely to be measured and cautious, rather than a hasty return to normal. If refiners, hoping prices will fall further on more positive news, delay their purchases, the market could tighten further.

The dynamic exacerbates “one of the most important features of the near-term market” in the dislocation between futures and physical commodities, Shah said, as physical spreads and tanker rates remain elevated as crude buyers continue to pay premiums to secure the limited oil currently available outside the Gulf.

“In this ceasefire environment, paper markets reprice relief almost instantly, while physical indicators and spreads still reflect caution,” Shah said.

“This shows that perceived geopolitical risk can decline faster than operational risk.”

Jake Conley is a breaking news reporter covering US stocks for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.

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