Oil Dives Then Recovers With Putin-Biden Ukraine Meeting Hopes

(Bloomberg) -- Oil slumped then recovered after France said that the U.S. and Russian presidents agreed to a summit meeting over Ukraine, offering hope of an easing in tensions that have roiled energy markets. 

West Texas Intermediate initially fell 2.7%, before recovering most of its slump, after Joe Biden and Vladimir Putin agreed to the “principle” of a summit proposed by French President Emmanuel Macron, according to statements from the White House and the Elysee. The Kremlin gave a cautious response and that there were “no concrete plans” for the talks to take place.

See also: Biden Agrees to Hold Putin Summit If No Invasion, U.S. Says

The U.S. told allies any Russian invasion would potentially see it target cities beyond the capital, Kyiv. Moscow, which has strenuously denied it plans an invasion, said over the weekend that its forces would remain in Belarus indefinitely. 

The tensions surrounding Ukraine are compounding an oil market in which demand is threatening to run away from supply and price spreads point to the tightest conditions in years. The CEO of Vitol Group, the world’s largest trader, said in an interview Bloomberg Television interview that prices could surpass $100 a barrel for sustained periods. Likewise, Saudi Aramco, the world’s largest producer, said it sees good signs that demand is rising, especially in Asia.

“The concern is that if tension in Eastern Europe escalates further that some of this supply might get disrupted intentionally or driven by political divisions,” affecting not only energy but other commodities, said Giovanni Staunovo, a commodity analyst at UBS Group AG. “I would expect the market to continue to react in a sensitive way.” 

Gas prices fell sharply on the prospects of a Biden-Putin summit.

Macron will prepare the discussions between the two presidents on “security and strategic stability in Europe,” the French government said, with the timing and format to be determined. Biden accepted the meeting on the condition an “invasion hasn’t happened,” White House Press Secretary Jen Psaki said in a statement.

The Kremlin spokesman Dmitry Peskov didn’t rule out the possibility of a presidential meeting, but said that’s “premature.” In two phone calls Sunday, Macron and Putin had agreed details only on continuing dialogue at the level of foreign ministers, Peskov said.

Any attack on Ukraine from multiple locations could essentially fence the country in, potentially upending commodity markets as regional flows are disrupted and possibly targeted by Western sanctions. 

Oil investors are also following negotiations to rekindle Iran’s 2015 nuclear agreement, which has made some progress, Iran’s Foreign Ministry Spokesman Saeed Khatibzadeh said in a press conference. Though the remaining issues are the hardest ones, he said. 

In a signal of the crude market’s bullishness, nearby contracts for WTI and Brent are commanding significant 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.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.