Oil Prices Drop Amid SPR Release, UAE OPEC Exit; Bakken Differential Widens

Oil prices fell sharply on Friday, with West Texas Intermediate crude dropping 2.58 percent to settle at $102.36 per barrel. Brent crude declined 1.41 percent to $108.84. The price drop coincides with a major new U.S. Strategic Petroleum Reserve release and market reactions to the United Arab Emirates' exit from OPEC.

The U.S. Department of Energy announced on Thursday a new emergency exchange of up to 92.5 million barrels of crude oil from the SPR, according to a statement from the agency reported by Rigzone. This action is part of President Donald Trump's coordinated 172 million barrel release and a broader 400 million barrel action by International Energy Agency nations. The crude will come from the Bayou Choctaw, Bryan Mound, Big Hill, and West Hackberry SPR sites, with bids due by May 4. The DOE stated this exchange, like prior ones, requires companies to return the borrowed oil with a premium, claiming a 24 percent premium was secured in earlier exchanges.

Simultaneously, markets are digesting the geopolitical shift from the UAE's withdrawal from OPEC. President Trump called the move "great" and a "good thing for getting the price of gas down," according to Rigzone. Analysis from Wood Mackenzie, cited by Rigzone, called the UAE's exit "the most significant fracture in the organization’s 66 year history" and said it "increases the risk of oversupply weakening prices." Benjamin Zycher of the American Enterprise Institute told Rigzone the exit will reduce adherence to OPEC+ production quotas and widen a political rift with Saudi Arabia.

Despite today's dip, underlying supply tensions remain high due to the ongoing conflict in Iran, which has closed the Strait of Hormuz. Wood Mackenzie noted the closure has shut in close to two million barrels per day of UAE offshore production. This is contributing to soaring retail fuel prices in the U.S., particularly in California, where the average gasoline price surged above $6 a gallon to $6.01, its highest since October 2023, according to AAA data reported by Rigzone.

For Bakken operators, the day's trading presented a mixed picture. While benchmark WTI fell, the Bakken differential to WTI widened to a discount of $3.42 per barrel. This discount impacts the wellhead price received for Bakken crude. The potential for increased global supply from a fractured OPEC+ and continued SPR releases could pressure prices in the medium term, but sustained geopolitical risk and robust demand, evidenced by record California gasoline prices, provide a floor. Natural gas prices posted a minor gain, rising $0.02 to $2.79.