WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled the last trading session of March and the first quarter with sharp losses after U.S. President Joe Biden announced a 1 million barrel per day (bpd) release of crude oil from the Strategic Petroleum Reserve over the next six months -- a one-time measure designed to bridge a global supply gap created by the loss of Russian oil exports in the aftermath of Moscow's assault on the sovereign state of Ukraine.
The unprecedented government intervention consists of a two-part plan beginning with the release of 180 million barrels (bbl) in total from the nation's emergency oil stocks over the next six months complemented with price incentives for domestic producers to increase oil output by the end of the year.
"The record release will provide a historic amount of supply to serve as a bridge until the end of the year when domestic production ramps up," the White House stated.
It's worth noting that this would be the largest drawdown in the 45-year history of the SPR which currently holds 568 million bbl and follows the second biggest draw of 50 million bbl facilitated in November, which combined a Congressional directed sale and a presidential directive.
The White House said the decision was made in consultations with U.S. allies and partners that are expected to release additional oil to ease the pain of spiking oil prices.
Although it's difficult to overstate the scale of intervention, the measure is unlikely to make up for the loss of Russian oil exports long term. The market's deficit is estimated between 1.5 million and 2 million bpd currently -- a trend that is likely to accelerate as Western traders and banks increasingly shun dealmaking involving Russian oil. For reference, the International Energy Agency expects a 3 million bpd loss of Russian oil production in April as previously announced sanctions reverberate through the global economy, and companies look to avoid damaging their reputations. Russian pipeline operator Transneft has reportedly restricted oil intake into its network amid rapid buildup in storage levels.
Organization of the Petroleum Exporting Countries and producers outside of the cartel led by Russia earlier Thursday reaffirmed their commitment to a Moscow-backed plan to raise collective production in measured steps. The alliance said it would aim to raise output by 432,000 bpd in May, slightly more than the 400,000 bpd in monthly production increases OPEC+ agreed to in July 2021. The decision comes after Saudi Arabia and the United Arab Emirates, the two OPEC members that still hold significant spare capacity, said publicly they won't expel Russia from the alliance or pump more oil to help the West in its confrontation with Moscow.
On the session, NYMEX May West Texas Intermediate futures plummeted $7.54 to settle at $100.28 bbl after trading as low as $99.66 earlier in the session. ICE May Brent futures expired at $107.91 bbl, down $5.54, with June Brent futures widening its discount to the expired contract with a $104.71 settlement, down $6.73.
NYMEX April ULSD futures declined 11.73 cents or 3.1% to expire at $3.6912 gallon, with May ULSD futures settling at a steep 33.03 cents discount to the expired contract at $3.3609 gallon. April RBOB futures fell 13.54 cents to expire at $3.1896 gallon, with the May contract settling at a 3.87 cents discount to the now expired contract in the backwardated market.
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