Oil, Gold Cede Gains After Biden, Putin Accept Summit Proposal

(Bloomberg) — Oil gave up early gains in Asia, along with gold, after the U.S. and Russian presidents agreed to a summit meeting over Ukraine.

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West Texas Intermediate was little changed, easing from a more than 2% gain earlier, after Joe Biden and Vladimir Putin agreed in principle to a proposal for a summit meeting from French President Emmanuel Macron. Earlier, the U.S. told allies that any Russian invasion would potentially see it target multiple cities beyond the capital, Kyiv. Moscow, which has repeatedly denied it plans an invasion, said over the weekend that its forces would remain in Belarus indefinitely.

Global commodity markets have been in thrall to the prolonged standoff over Ukraine, which comes at a time of already robust demand, surging prices and concern over fast-depleting inventories. Raw materials are trading close to a record, boosting inflation and complicating the task for central banks as they seek to tame the pace of price gains without derailing the recovery.

Any invasion from multiple locations could essentially fence Ukraine in, potentially upending commodity markets as regional flows were disrupted and, possibly, targeted by Western sanctions. Traders are also tracking wheat, which both Ukraine and Russia export, as well as aluminum and nickel.

Oil investors, meanwhile, were following negotiations to rekindle Iran’s 2015 nuclear agreement, which remain bogged down. Germany’s chancellor warned that it’s now or never to save the accord, which could usher in a return to the world market of official oil supplies from the Persian Gulf nation.

Oil could be set for a “prolonged period” above $100 a barrel this year, with world demand poised to expand to a record, Vitol Group Chief Executive Officer Russell Hardy told Bloomberg Television. The head of the world’s largest independent oil trader said that the market will get tighter, with daily consumption set to rise well above pre-Covid levels by the end of 2022.

In a signal of the crude market’s bullishness, nearby contracts for WTI and Brent are commanding enormous premiums over those further out, indicating that traders are clamoring for barrels right now. In Asia, refiners are seeking to ramp up their run rates to benefit from healthy margins.