Oil Declines on Trump’s Plan to Talk With Russia on Ukraine War

(Bloomberg) -- Oil fell after US President Donald Trump said he spoke with Russian President Vladimir Putin, sparking speculation that risks to crude supplies in the region may ease.

Trump said the leaders agreed to begin talks on ending the war in Ukraine, reversing three years of US policy on the conflict. West Texas Intermediate slipped 2.7% to settle near $71 per barrel.

The Ukraine developments deepened earlier declines that were driven by higher-than-projected US consumer price data, which caused a brief surge in the dollar and made commodities priced in the currency less appealing.

A ceasefire between Russia and Ukraine throws into question the longevity of US sanctions that are showing early signs of hampering Russian crude flows. Several million barrels from platforms in the Pacific are stranded after the shuttle tankers that hauled them to China were blacklisted. Still, the US Energy Information Administration said Tuesday that it doesn’t currently expect a large hit to Russian output.

The nascent peace talks imply that the sanctions “may be short-lived or have a higher probability of being rolled back than they did yesterday,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. A complete rollback hasn’t been priced in yet, she added.

Oil prices have slumped in the past three weeks as Trump’s tariffs threaten to spark trade wars that may weigh on crude demand, and OPEC warned in its outlook on Wednesday that US trade policies risk stoking further market volatility. The International Energy Agency’s monthly report is due on Thursday.

Nationwide US crude inventories rose 4.07 million barrels last week, the third straight gain, according to figures released Wednesday. Futures slightly pared losses as the increase was smaller than the 9 million-barrel buildup projected by the American Petroleum Institute.

Underscoring the environment of ample supplies, WTI’s prompt spread — the difference between its two nearest contracts — narrowed to 14 cents a barrel, the weakest since November.

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