After Biden and Putin agreed to the summit proposal, oil and gold prices fell

Both oil and gold reversed early gains in Asia following the US and Russian presidents’ agreement to meet in a summit over Ukraine.

West Texas Intermediate was little changed, reversing a more than 2% gain earlier in the day following an agreement in principle between Joe Biden and Vladimir Putin on French President Emmanuel Macron’s proposal for a summit meeting. Previously, the US warned allies that any Russian invasion would likely target cities other than Kyiv. Moscow, which has repeatedly denied invading Belarus, announced over the weekend that its forces would remain in the country indefinitely.

The protracted standoff over Ukraine has enslaved global commodity markets, at a time when demand is already strong, prices are surging, and investors are concerned about rapidly depleting inventories. The price of raw materials is approaching a record high, boosting inflation and complicating central banks’ efforts to contain price increases without derailing the recovery.

Any invasion from multiple directions could effectively encircle Ukraine, upsetting commodity markets by disrupting regional flows and potentially subjecting Ukraine to Western sanctions. Traders are also keeping a close eye on wheat, which Ukraine and Russia both export, as well as aluminium and nickel.

Meanwhile, oil investors were keeping an eye on the stalled negotiations to resurrect Iran’s 2015 nuclear deal. Germany’s chancellor has warned that it is now or never to save the agreement, which could pave the way for the Persian Gulf nation to resume official oil supplies to the global market.

According to Vitol Group Chief Executive Officer Russell Hardy, oil could be set to trade above $100 per barrel for a “protracted period” this year, as global demand is expected to reach a record high. The CEO of the world’s largest independent oil trader believes the market will tighten, with daily consumption expected to exceed pre-Covid levels by the end of 2022.

To illustrate how bullish the crude market is, nearby WTI and Brent contracts are commanding enormous premiums over those further out, indicating that traders are clamouring for barrels right now. Asia’s refiners are looking to boost their run rates in order to maintain healthy margins.