Oil prices headed for their longest decline since 2021, as traders judged that US efforts to end the war in Ukraine would not impact overall supply, even as Washington punished India for taking Moscow's crude.

Brent fell near $66 a barrel, down for the seventh straight session, while West Texas Intermediate fell below $64. US President Donald Trump, who has set a Friday deadline for Moscow to agree to a ceasefire, said he is willing to meet with Vladimir Putin, even if the Russian leader has not yet agreed to sit down with Ukrainian President Volodymyr Zelenskiy.

Earlier this week, Trump doubled levies on all Indian imports to 50% as punishment for taking Russian crude, prompting local state-owned refiners to withdraw from purchases and seek other sources. Meanwhile, Treasury Secretary Scott Bessent said the US may also impose tariffs on China at some point, when asked about targeting countries that buy Moscow's energy.

Oil prices plummeted in August after three months of gains. Investors braced for a potential supply glut later this year after OPEC+ resumed its campaign to ease production curbs. At the same time, crude futures were weighed down by signs of slower growth in the world's largest economy as Trump's broader trade tariffs impacted activity, posing a risk to energy demand. "Positive signals from this week's U.S.-Russia talks and the planned face-to-face meeting between Trump and Putin have eased concerns about Russian supply disruptions, leading to a significant decline in geopolitical risk premiums," said Gao Mingyu, chief energy analyst at SDIC Essence Futures Co.

Oil traders, producers, and users have proven adept in recent years at responding to supply challenges, whether stemming from conflict, geopolitical risks, or administrative hurdles such as sanctions and tariffs. Among signs of that flexibility this week were Russian Urals cargoes from the country's west offered to users in China, buyers who typically do not take the grade.

Brent's flash spread, the difference between its two nearest contracts, suggests that near-term conditions are becoming less tight. The closely watched metric has narrowed to 53 cents per barrel in backwardation, compared with a differential of more than $1 per barrel a month ago. At this point, the market may be shifting toward a more bearish sentiment, driven by pessimistic supply-demand fundamentals, given the approaching end of the peak season, according to SDIC's Gao. Brent for October delivery fell 0.4% to $66.20 per barrel as of 1:58 p.m. in Singapore.

Most-active prices have fallen about 5% this week, the biggest drop since late June. WTI for September delivery fell 0.5% to $63.59 per barrel. (alg)

Source: Bloomberg