Oil prices climb 2% on drop in US crude inventories as investors focus on Ukraine peace push

[NEW YORK] Oil prices climbed about 2 per cent on Wednesday on a bigger-than-expected weekly drop in US crude inventories as investors awaited the next steps in talks to end the Ukraine war, with sanctions on Russian crude remaining in place for now.

Brent crude futures were up US$1.05, or 1.6 per cent, to settle at US$66.84 a barrel. US West Texas Intermediate (WTI) crude futures rose 86 cents, or 1.4 per cent, to settle at US$63.21.

The US Energy Information Administration said energy firms pulled 6.0 million barrels of crude from inventories during the week ended Aug 15.

That was bigger than the draw of 1.8 million barrels forecast by analysts in a Reuters poll and the decline of 2.4 million barrels that market sources said the American Petroleum Institute trade group cited in its figures on Tuesday.

“We had a decent-sized crude drawdown. We saw a rebound in exports … That and the strong refinery demand really makes this a bullish report,” said John Kilduff, partner with Again Capital.

On Tuesday, crude prices fell more than 1 per cent – with WTI closing at its lowest level since May 30 – on optimism that an agreement to end the Russia-Ukraine war seemed closer.

“Much of the choppy price action has been driven by daily updates to the Ukraine/Russian negotiations that have gone back and forth from bearish to bullish as far as the impact on future oil balances is concerned,” analysts at energy advisory firm Ritterbusch and Associates said in a note.

US President Donald Trump conceded that Russian President Vladimir Putin might not want to make a deal.

Russia was the second-biggest producer of crude in 2024 behind the US, so any agreement that could ease sanctions on Moscow should boost the amount of Russian oil available for export to global markets.

On Tuesday, Trump said he had ruled out putting US troops on the ground in Ukraine, but said the US might provide air support as part of a deal to end Russia’s war in the country.

On Wednesday, Russia said attempts to resolve security issues relating to Ukraine without Moscow’s participation were a “road to nowhere”, sounding a warning to the West as it scrambles to work out guarantees for Kyiv’s future protection.

Russia said it expects to continue supplying oil to India despite warnings from the US, Russian embassy officials in New Delhi said on Wednesday, adding that Moscow hopes trilateral talks will soon take place with India and China.

Trump has announced an additional tariff of 25 per cent on Indian goods exported to the US from Aug 27, as a punishment for buying Russian oil.

India’s state-run refiners Indian Oil and Bharat Petroleum have bought Russian oil for September and October delivery, resuming purchases after discounts widened, two company officials aware of the matter said on Wednesday.

Russian forces have advanced in the east of Ukraine’s Dnipropetrovsk region, taking the village of Novoheorhiivka close to the Donetsk region, Russia’s defence ministry said on Wednesday.

“The likelihood of a quick resolution to the conflict with Russia now seems unlikely,” Daniel Hynes, senior commodity strategist at ANZ, said in a note.

Other oil suppliers

In other supply news, Iran believes the moment has not yet arrived for “effective” nuclear talks with Washington, Tehran’s top diplomat said on Wednesday.

Iran was the third-biggest producer of crude in the Organization of the Petroleum Exporting Countries (Opec) in 2024 behind Saudi Arabia and Iraq, so any agreement to ease sanctions on Tehran should boost Iranian oil exports to global markets.

In Saudi Arabia, meanwhile, crude exports slipped in June to their lowest level in three months, according to data from the Joint Organizations Data Initiative (JODI).

In Norway, the second biggest oil producer in Europe after Russia, combined oil and gas production exceeded an official forecast by 3.9 per cent in July, according to the Norwegian Offshore Directorate (NOD). REUTERS