Crude oil futures were steady to higher in midmorning Asian trade March 25 as supply concerns eased after the US and European partners failed to reach an agreement on sanctioning Russian energy, says an article published in S&P Global.
ICE and NYMEX
At 11:44 am Singapore time (0344 GMT), the ICE May Brent futures contract was up 22 cents/b (0.18%) from the previous close at $119.25/b, while the NYMEX May light sweet crude contract fell 3 cents/b (0.03%) at $112.31/b.
Reduce the reliance on Russian energy
EU leaders did not take any immediate decision to curb Russian imports of oil and gas following back-to-back emergency meetings of NATO, the G-7 and the European Council in Brussels attended by US President Joe Biden.
Crude oil futures had settled lower around 2% in overnight trading March 24 in response.
“Oil is trading a touch lower after EU leaders could not table unanimous support for a comprehensive Russian energy embargo,” said SPI Asset Management Managing Partner Stephen Innes in a March 25 note. “But the fact that oil is only trading a few dollars more down suggests the EU embargo was always a low-probability outcome.”
Nonetheless, the G-7 leaders pledged to take further steps to reduce their reliance on Russian energy imports and called on OPEC to step up oil production.
OPEC, however, has insisted that the disruptions to the market are not its responsibility to mitigate, and delegates say the bloc remains disinclined to cast aside its production quotas or raise them more aggressively.
The volatility in prices
OPEC is scheduled to meet with Russia and nine other allies March 31 to discuss May production levels.
The volatility in crude oil prices was here to stay in the short term, analysts said. Both crude oil benchmarks have endured wild intraday swings since the war in Ukraine started, oscillating between large gains and losses within the day.
Adding further volatility was increased margin rates for ICE Brent crude futures. ICE raised the margin requirements for May Brent crude futures by 19% effective March 25 — the third margin update this year.
“This move will do little to help open interest, which has been in steep decline since mid-February and is basically at the lowest level we have seen since 2015. Falling market liquidity means that the market will likely continue to trade in a volatile manner,” said ING analysts Warren Patterson and Wenyu Yao.
Analysts at Singapore bank OCBC and OANDA Senior Market Analyst Jeffrey Halley said they expect oil to trade within a range of $100-$120/b in the near term, in the absence of any fresh developments.
Dubai swap
Dubai crude swaps and intermonth spreads were wider in midmorning Asian trade March 25 from the previous close.
The May Dubai swap was pegged at $106.90/b at 11 am Singapore time (0300 GMT), up $3.35/b (3.24%) from the March 24 Asian market close.
The April-May Dubai swap intermonth spread was pegged at $4.60/b at 11 am, up 59 cents/b over the same period, and the May-June intermonth spread was pegged at $3.03/b, up 45 cents/b.
The May Brent/Dubai EFS was pegged at $12.12/b, up $1.17/b.
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Source: S&P Global
