Oil Slips On Macron Comments on Russia and Ukraine

Meanwhile, Tuesday sees yet more signs of a bullish market: File Image/Pixabay

Oil prices on Tuesday slipped for a second straight session – this time by 2.2 percent – based on French president Emmanuel Macron stating he received assurances from Russian president Vladimir Putin that he would not escalate tensions with Ukraine (even though Moscow denied the claim).

Based on this dubious assurance, West Texas Intermediate dropped $1.96 to settle at $89.36 per barrel, while Brent fell $1.91 to close at $90.78 per barrel.

Rebecca Babin, senior energy trader at CIBC Private Wealth Management, explained, "A lot of the geopolitical risk is priced in to crude currently so any progress, even small, could take a bit of that premium out of the price.

"It will not induce a massive selloff unless something concrete happens, but if things are not getting worse crude starts to fade off the highs."

Still, this doesn't alter the remarkable growth of demand globally, coupled with plunging inventories everywhere, and the latest sign of a bullish market is benchmark dated Brent assessed by S&P Global Platts at more than $98 per barrel, the strongest since 2014.

Also, Citigroup Inc. reported that thanks to the high prices, U.S. shale explorers are poised to boost spending by almost 40 percent this year; plus, output will average 12.6 million barrels per day (bpd) in 2023, an increase from its previous estimate of 12.41 million bpd, according to Energy Information Administration data.

Meanwhile in India, at least 18 of the country's 23 refineries reportedly operated at more than 100 percent of nameplate capacity last month, up from just eight in August.

Officials told media that Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp. are reaching out to term-contract suppliers including Saudi Arabia and Iraq for extra barrels or buying on the spot market.

However, no rally lasts forever, and Robert Yawger, executive director of energy futures at Mizuho, noted that Brent and WTI face extreme backwardation in coming months: he said both benchmarks through July were in "super backwardation," with each month trading at least $1 per barrel below the prior month.