Oil prices climbed about 2% on Wednesday on a bigger-than-expected weekly drop in U.S. 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 $1.05, or 1.6%, to settle at $66.84 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 86 cents, or 1.4%, to settle at $63.21.

The U.S. Energy Information Administration said energy firms pulled 6.0 million barrels of crude from inventories during the week ended August 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% 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.

U.S. 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 U.S., 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 U.S. troops on the ground in Ukraine, but said the U.S. 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 U.S., 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% on Indian goods exported to the U.S. from August 27, as a punishment for buying Russian oil.

India's state-run refiners Indian Oil and Bharat Petroleum (NSE:BPCL) 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.

Source: Investing.com