Oil prices plunged more than 1% on Thursday (October 16) after U.S. President Donald Trump said he and Russian President Vladimir Putin agreed to meet soon in Hungary to discuss ending the war in Ukraine, which has raised uncertainty over global energy supplies.

Brent crude futures closed 85 cents, or 1.37%, lower at $61.06 per barrel. U.S. West Texas Intermediate crude futures closed 81 cents, or 1.39%, lower at $57.46. This was the lowest close for both benchmarks since May 5.

Trump said he and Putin agreed on Thursday to meet soon in Budapest to discuss ending the war in Ukraine, one day before the U.S. president is scheduled to speak with Ukrainian leader Volodymyr Zelenskiy. The date for the summit was not announced.

"Geopolitical tensions between Russia, the United States, and Ukraine are starting to heat up again," said Tim Snyder, chief economist at Matador Economics, prompting some market participants to loosen their positions.

Also weighing on prices, the Energy Information Administration (EIA) said U.S. crude oil inventories rose by 3.5 million barrels to 423.8 million barrels last week, compared with analysts' expectations in a Reuters poll for a 288,000-barrel increase. The larger-than-expected crude oil inventory increase was largely due to a decline in refinery utilization as refineries enter their autumn recovery period.

"A slightly bearish report, with the large crude build offset by a large distillate drawdown, but with implied oil demand much weaker than last week," said UBS analyst Giovanni Staunovo. The data also showed an increase in U.S. production to 13.636 million barrels per day, a record high.

Meanwhile, traders are also anticipating a potential halt in Russian oil imports by India, which could turn the tide and increase demand for supplies from other countries. President Trump said Prime Minister Narendra Modi had promised on Wednesday that India would stop buying from Russia, India's main oil supplier, which accounts for about a third of its oil imports.

"This is a positive development for crude oil prices because it will remove a major buyer of Russian oil," said Tony Sycamore, market analyst at IG. Both contracts on Wednesday hit their lowest levels since early May due to U.S.-China trade tensions and concerns about a potential oversupply.

Some Indian oil refineries are preparing to reduce Russian oil imports, with expectations of a gradual reduction, three sources familiar with the matter told Reuters. However, India said on Thursday that its two main goals were ensuring stable energy prices and securing supplies, without addressing Trump's comments.

Russia said it was confident that its energy partnership with India would continue. The British government announced new sanctions on Wednesday, directly targeting Russia's Rosneft and Lukoil – two of the world's largest energy companies. (alg)

Source: Reuters