Trump-Putin Summit Could Swing Oil Market. Prices Could Slide, or Hit $90.

Sanctions on Russia over the Ukraine war are critical to the price of oil. Above, an oil pump jack is shown in Nolan, Texas. (Brandon Bell/Getty Images)

Oil prices have gradually declined in the past couple of weeks, as supply has outpaced demand. Friday’s meeting between President Donald Trump and Russian President Vladimir Putin could turn that around.

Through Thursday trading, Brent crude, the international oil benchmark, was down 7.8% to $66.84 per barrel since the start of the month. The Energy Select Sector SPDR Fund , which holds major U.S. energy stocks, is down 1.9% this month.

Any movement toward a peace deal on the Ukraine war could cause prices to fall below $60 per barrel, some analysts say. But if the summit ends badly, and the U.S. imposes stricter oil sanctions on Russia, prices could jump over $80.

Russia already faces sanctions blocking oil sales to Europe and the United States. They complicate, but don’t prevent, sales to other countries.

But the Trump administration has also warned India that it could impose secondary sanctions against it for buying Russian oil. The Senate is considering a bill that would impose secondary sanctions.

Citi analyst Anthony Yuen writes that India imports about 1.7 million barrels a day from Russia, and could be convinced to halt all of those purchases because of pressure from the U.S. A shift of that magnitude could cause prices to rise above $80, and possibly even above $90.

Still, such an abrupt change seems like a long shot. The U.S. wouldn’t want to see oil prices jump that much because it would make gasoline more expensive, adding to inflation. And China might end up buying some of the barrels that India no longer purchases, thereby keeping the oil market more balanced.

On the bearish side, Trump could help move Russia and Ukraine closer to peace, opening up the possibility of removing sanctions on Russian oil. Russia could then sell more oil onto the open market, depressing prices. Yuen expects sanctions relief would result in prices falling another $3 to $4.

That outcome also feels like a long shot, however. Europe would need to agree to sanctions relief, and most European countries aren’t ready to allow Russian oil back onto the market.

“We think there is a strong possibility that Friday’s talks will produce soundbites that signal diplomatic progress rather than concrete deal specifics,” wrote RBC Capital Markets strategist Helima Croft. “While a ‘to-be- continued’ outcome might be sufficient for President Trump to pause the secondary tariff threat for energy imports, it is unlikely to lead to a major dismantling of sanctions, much less an immediate end to the fighting.”

Write to Avi Salzman at avi.salzman@barrons.com