Oil prices plunged 2% on Tuesday (October 28th), marking a third straight day of declines as investors assess the impact of US sanctions on Russia's two largest oil companies, as well as a potential OPEC+ plan to increase production.

Brent crude fell $1.29, or 2%, to $64.33 per barrel at 08:56 GMT. US West Texas Intermediate crude fell $1.20, or 2%, to $60.11. "Traders are weighing progress in US-China trade talks and the broader supply outlook," ANZ said in a morning note.

The lower prices come after Brent and WTI posted their biggest weekly gains since June last week, in response to US President Donald Trump's decision to impose Ukraine-related sanctions on Russia for the first time in his second term, targeting oil companies Lukoil and Rosneft. Investors continue to weigh the effectiveness of those sanctions on Russia.

"The oil market is still debating whether the latest sanctions will impact Russian oil exports, with market participants slightly reducing the supply risk premium established last week," said UBS analyst Giovanni Staunovo. The impact of sanctions on oil-exporting countries will be limited due to overcapacity, said International Energy Agency Executive Director Fatih Birol on Tuesday.

Following the US sanctions, Russia's second-largest oil producer, Lukoil, said on Monday that it would sell its international assets. This is the most significant action so far by a Russian company since Western sanctions over Russia's war in Ukraine, which began in February 2022.

Meanwhile, Indian refiners have not placed new orders for Russian oil since the sanctions were imposed, as they await clarity from the government and suppliers, sources told Reuters on Tuesday.

OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, is likely to increase production modestly in December, four sources familiar with the talks told Reuters.

After curbing production for several years in an effort to support the oil market, the group began unwinding those cuts in April. Investors will be closely monitoring the prospects for a trade deal between the US and China, the world's two largest oil consumers, with Trump and President Xi Jinping scheduled to meet on Thursday in South Korea.

Beijing hopes Washington can reach a mid-level agreement to "prepare for high-level interactions" between the two countries, Foreign Minister Wang Yi told US Secretary of State Marco Rubio in a phone call on Monday. (alg)

Source: Reuters