Crude oil price drops on possibility of Biden-Putin summit

Global markets whipsawed in response to the latest developments in the Ukraine crisis, with stocks paring losses and oil reversing gains after Joe Biden and Vladimir Putin accepted “the principle” of a summit to ease tensions in eastern Europe.

Brent crude, the international benchmark, pulled back from gains of as much as 1.5 per cent to fall 0.3 per cent at $ 93.23 a barrel. The moves came after the White House and the French presidency confirmed that the US and Russian presidents could meet as part of an effort to defuse the crisis.

Futures markets tipped Europe’s regional Stoxx 600 share index to rise about 0.7 per cent at the open, while futures contracts tracking the FTSE 100 were up 0.5 per cent. US financial markets were closed on Monday for a national holiday.

“The market is still very much driven by the Ukraine situation,” said Tai Hui, chief Asia markets strategist at JPMorgan Asset Management.

Hui said the possibility of a summit “does provide a bit more of a relief at least for the near term” for oil prices, which recently touched on a seven-year high over concerns of an imminent Russian invasion of Ukraine.

Asian equity benchmarks initially tumbled only to pull back on news of the potential summit. Japan’s Topix fell as much as 1.8 per cent before easing losses to be down 0.7 per cent.

Hong Kong’s Hang Seng index was pushed 0.9 per cent lower by losses for Chinese technology shares.

Government bond markets were steady, meanwhile, as news of the potential summit limited buying of haven assets. The yield on the 10-year German bund, which moves inversely to its price, was broadly flat at 0.2 per cent.

The UK’s 10-year gilt yield declined by 0.02 percentage points to 1.36 per cent. The price of spot gold dipped 0.5 per cent to $ 1,889 per ounce.

The possibility of a meeting between Putin and Biden, part of a diplomatic effort led by French President Emmanuel Macron, followed a week of uncertainty over whether Moscow would launch a full invasion of Ukraine. The threat of a conflict rose when Belarus said over the weekend that 30,000 Russian troops participating in joint drills would remain indefinitely.

“The announced extension of military exercises between Belarus and Russia over the weekend and further wars from the US administration of possible imminent military action have heightened market anxieties,” said Robert Carnell, head of Asia-Pacific research at ING.

Moscow has massed as many as 190,000 troops on Ukraine’s borders despite previously pledging they would return to Russia. Following two conversations between Macron and Putin on Sunday, the French presidency said the summit could be held “only be held on the condition that Russia does not invade Ukraine”.

The back-and-forth over Ukraine has unsettled global markets and stoked wild swings in energy prices as investors reacted to the possibility of substantial disruptions to oil and natural gas supply chains.

On Sunday, German Finance Minister Christian Lindner told the Financial Times that Russia’s role as a reliable supplier of natural gas to Germany could change if it invaded Ukraine and the west imposed sanctions against Moscow.

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