Oil prices fell on Tuesday as traders bet that talks over a possible agreement to legitimize or end Russia's invasion of Ukraine could ease sanctions on Russian crude oil, boosting global supply.

Brent crude futures settled at $65.79 a barrel, down 81 cents, or 1.22%. U.S. West Texas Intermediate crude futures for September delivery, set to expire on Wednesday, finished at $62.35 a barrel, down $1.07, or 1.69%.

"Even with this peace dividend, we have a record short position," said Phil Flynn, senior analyst with Price Futures Group. "Because of the size of the short position, people are betting on a cease-fire and if we don't get one there could be a bounce."

Following a White House meeting on Monday with Ukrainian President Volodymyr Zelenskiy and European allies, U.S. President Donald Trump announced in a social media post that he had spoken with Russian President Vladimir Putin.

Trump said arrangements were being made for a meeting between Putin and Zelenskiy, which could lead to a trilateral summit involving all three leaders.

Suvro Sarkar, lead energy analyst at DBS Bank, said Trump's softened stance on secondary sanctions targeting importers of Russian oil had reduced the risk of global supply disruptions, easing geopolitical tensions slightly.

Chinese refineries have purchased 15 cargoes of Russian oil for October and November delivery as Indian demand for Moscow's exports has fallen away, two analysts and one trader said on Tuesday.

Zelenskiy described his talks with Trump as "very good" and noted discussions about potential U.S. security guarantees for Ukraine. Trump confirmed the U.S. would provide such guarantees, though the extent of support remains unclear.

Trump has pressed for a quick end to Europe's deadliest war in 80 years, but Kyiv and its allies worry he could seek to force an agreement on Russia's terms.

"An outcome which would see a ratcheting down of tensions and remove threats of secondary tariffs or sanctions would see oil drift lower toward our $58 per barrel Q4-25/Q1-26 average target," Bart Melek, head of commodity strategy at TD Securities, said in a note.

Source: Investing.com