Crude slides more than $5/b as US considers 1 mil b/d SPR release

Crude oil futures plunged more than $5/b in Asian morning trade March 31 following news that US President Joe Biden was considering to release 1 million b/d of oil amid high energy costs.

At 10:00 am Singapore time (0200 GMT) prices retracted slightly with the ICE June Brent futures contract down $3.76/b (3.37%) from the previous close at $107.68/b, while the NYMEX May light sweet crude contract fell $4.61/b (4.28%) at $103.21/b.

A report from Bloomberg late March 30 said Biden is considering releasing 1 million b/d of oil from the country's strategic petroleum reserve over several months with the total volume possibly reaching as high as 180 million barrels.

According to White House guidance, Biden will be delivering remarks on energy prices in the US afternoon March 31.

The report sent NYMEX crude prices crashing by almost $6/b in early morning trade March 31, erasing all of the gains from the March 30 session, though they later trimmed losses.

"This is what the market really needed to cool down prices -- a constant stream of incremental supply. A one-time release from SPR, is an inadequate response to ongoing supply shortages with no end date," Vandana Hari, CEO of Vanda Insights said.

The latest developments will mark another turn in the rollercoaster ride in oil prices in recent weeks. Oil price volatility has jumped since the war in Ukraine broke out, with crude oil prices swinging between large gains and losses in the intra-day sessions.

Hari further noted that the US SPR release will likely be a mismatch for the physical market.

"It is a slightly asymmetric response because the SPR crude is sweet, whereas the US refiners (and their European counterparts) need to replace sour Russian barrels," she said. In the long run, the bigger problem with a festering Ukraine and the standoff between Russia and the EU can be over ruble payments in the gas market, she added.

Adding further pressure on sentiment, OPEC and its allies appear set to approve another modest crude production increase for May in their meeting later March 31, as new production baselines for the top five members go into effect, delegates from the group said March 30.

Delegates said the exact quotas had yet to be agreed. If the new baselines are adopted, it could result in an increase of about 432,000 b/d, which would be slightly more than the past monthly hikes of 400,000 b/d.

Dubai crude swaps and intermonth spreads were lower in mid-morning trade in Asia March 31 from the previous close.

The May Dubai swap was pegged at $100.33/b at 10 am Singapore time (0200 GMT), down $1.15/b (1.13%) from the March 30 Asian market close.

The April-May Dubai swap intermonth spread was pegged at $4.20/b at 10 am, down 48 cents/b over the same period, and the May-June intermonth spread was pegged at $2.28/b, down 36 cents/b.

The May Brent/Dubai EFS was pegged at $9.26/b, down $1.27/b.