Marginally Lower

WTI and Brent trade ~$0.60 softer vs. their respective settlement levels at writing, with developments in the Russia-Ukraine situation continuing to dominate recent price action. This comes after the benchmarks added over $2.00 apiece on Monday.

• Both benchmarks have edged away from Monday’s cycle highs ($95.82 for WTI and $96.78 for Brent), following official confirmation that a statement by Ukrainian PM Zelensky re: a possible Russian attack on Wednesday was a purely sarcastic remark. More broadly, a possible diplomatic resolution to the Ukrainian standoff seemingly remains in play. Russian Foreign Minister Lavrov on Monday said that negotiations were “far from exhausted.”
• Still, WTI and Brent’s prompt spreads have surged to ~$2.00 and ~$2.20, respectively. This deepening level of backwardation points to continued, growing demand for the front crude contracts, a sign of lingering geopolitical tension, even with a diplomatic resolution re: the Ukraine situation remaining on the table.
• In crude-specific news, the EIA on Monday revised U.S. shale output forecasts upwards, with March ’22 output tipped to reach 8.71mn bpd. This would represent the highest level of output observed since March ‘20.
• Looking ahead, U.S. API crude inventory estimates are due later Tuesday, adding some crude-specific risk to the headline risk surrounding the Russia-Ukraine situation.