NYMEX crude hovers around $100/b after US announces SPR release

Crude oil futures were largely steady in mid-morning Asian trade April 1 as prices consolidated after US President Joe Biden's announcement of a Strategic Petroleum Reserve release sent crude prices diving more than $5/b overnight.

At 10:19 am Singapore time (0219 GMT), the ICE June Brent futures contract was up 6 cents/b (0.06%) from the previous close at $104.77/b, while the NYMEX May light sweet crude contract was down 16 cents/b (0.16%) at $100.12/b.

The Biden administration will release an unprecedented 1 million b/d from the US SPR for the next six months as part of efforts to rein in gasoline prices that have soared following Russia's invasion of Ukraine, the White House said March 31.

The announcement sent NYMEX crude prices sliding overnight, with the front-month contract settling down 7% and ICE Brent crude down 3.2%.

"Without a doubt, SPR releases are a step to cool prices," SPI Asset Management Managing Partner Stephen Innes said in an April 1 note.

"Still, I think it is worth keeping in mind that 180 million barrels is approximately nine days of US demand and while 1 million barrels per day is better than nothing and can help balance the 4 million b/d lost from Russia for about six months, what happens after?" he added.

A planned major release from US SPR over the coming months would lower Brent crude prices by $15/b in the second half of 2022 but could trigger higher oil prices in 2023 if demand growth responds, US bank Goldman Sachs said March 31.

It lowered its H2 2022 Brent forecast by $15/b to $120/b and said the US move could raise its 2023 Brent oil prices $5/b above its current $110/b forecast for the year, reflecting higher demand and lower shale supply exiting 2022.

In a sign of a reshuffling of international crude oil flows, differentials for light sweet crudes in the Mediterranean and West Africa have tumbled as Russian crudes displace those from the former that typically head to Asia.

Saharan Blend, a light sweet Algerian grade similar in quality to WTI, was offered at a steep $3/b discount to the record high April official selling prices of Dated Brent plus $5/b, S&P Global Commodity Insights reported earlier.

The release of US SPR barrels could exacerbate the changing dynamics as most of the SPR crudes are light and sweet, instead of the medium sour crudes that European refiners are used to, Vandana Hari, CEO of Vanda Insights, noted earlier.

The OPEC+ at a meeting March 31 approved another modest oil production increase of 432,000 b/d for May, up from 400,000 b/d, due to a readjustment of quotas for its biggest members.

Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia April 1 from the previous close.

The June Dubai swap was pegged at $96.90/b at 10 am Singapore time (0200 GMT), down $1.12/b (1.14%) from the March 31 Asian market close.

The May-June Dubai swap intermonth spread was pegged at $1.88/b at 10 am, down 46 cents/b over the same period, and the June-July intermonth spread pegged at $1.23/b, down 39 cents/b.

The June Brent/Dubai EFS was pegged at $7.97/b, down $1.46/b.