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Oil prices ended the 6th week of steep volatility. In the mid-week, Brent crude price fell below the $100 mark briefly and recovered and closed the week at $102.78 per barrel, slightly lower than last week’s closing. WTI crude price closed the week slightly lower at $98.26 per barrel. Fears of weakening oil demand from record SPR releases seem to vanish away with prices recovering back.
The unprecedented record SPR release of 240 million barrels for the coming 6 months has failed to put downward pressure on oil prices. Also has failed to pressure the forward curve “backwardation” that is influenced by a strong physical market for SPOT barrels delivery.
No signs on the horizon yet of shifting into a contango market structure. Thus far, SPR aims is to ease upward pressure on SPOT physical market prices by increasing the amount of oil immediately available but it doesn’t seem to put considerable downward pressure on the physical barrels.
Various estimates of Russian crude oil losses may reach up to 3 million barrels per day (bpd), but this is not factored in the strong physical market as Russia’s crude oil production remains relatively as it was a month ago. February Brent crude price average was $97, March Brent crude price average was $118, Over the last twelve months, the price has risen 80%. Hence, if Russian crude is sold at a $30 discount, this is still higher than the pre-pandemic 2019 average of $64.
The International Energy Agency (IEA) announced 60 million barrels oil release from the strategic petroleum reserves (SPR) that excluded China and India who are large importers of Russian crude oil. The United States has announced 180 million barrels SPR release for the upcoming 6 months. This will bring up a total 240 million of SPR barrels. This will cause severe depletion in strategic stock, which will be hard to be replaced in the near future. Therefore, the number of forward coverage days might be revisited.
The latest figures from the Commodity Futures Trading Commission (CFTC) on April 5, 2022, showed that long positions on crude oil futures on the New York Mercantile Exchange (NYMEX) at 434,478 contracts, down by -6,474 contracts from the previous week (1,000 barrels for each contract). Speculators are still cautious in such very volatile price fluctuations.