One of the hottest trades in the oil market this year is keeping on rolling, with the potential to reshape the value of physical crude cargoes and transform global flows.

The price differential between swaps for London’s Brent and Middle East’s Dubai crude has turned deeply negative, data from brokerage PVM show. It’s a dramatic shift from the start of the year — and normal trading patterns — when the spread was at a sizable premium. It was at a discount of $1.60 a barrel on Monday, compared to more than $3 premium in January.

Fluctuations in the relative prices of key global benchmarks can prompt the rerouting of oil flows across the world and, in this case, make it more viable to sell barrels produced in and around the Atlantic Ocean into Asian markets. That in turn can lead to shifts in the premiums paid for some crude grades as buyers from different locations try to purchase cargoes.

Brent, which is the global benchmark crude, generally trades at a premium to Dubai as its lower sulfur content and lighter density tends to produce higher-quality fuels. But in recent months, production cuts by Saudi Arabia and Russia have tightened the medium-sour crude market, traders said. Additionally, Saudi official selling prices of grades such as Arab Light have also been hiked repeatedly this year, further supporting benchmark Dubai prices, they added.

Conversely, the tradeable volume of Dated Brent, a physical pricing benchmark that’s associated with the London futures market, has surged since its publisher S&P Global added US crude to the basket of crudes that can set its price. This has caused a flood of US West Texas Intermediate crude to be offered and delivered into the benchmark, weighing on Dated Brent’s valuation relative to global grades.

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Those shifts have coincided with a jump in trading activity for both the difference between the two grades and in Dubai-related contracts more generally. Open interest on the Brent-Dubai spread hit a record last month, and is 67% higher than a year ago.

--With assistance from Alex Longley.