* EU traders have some 300,000 T unsold Rusal metal - Citi
* Rusal U-turn bearish for U.S. aluminium premiums - Citi
* Also means more metal in Russia will hit markets - SP Angel (Adds closing prices)
By Maytaal Angel
LONDON, Dec 20 (Reuters) - Aluminium prices hit their lowest in 16 months on Thursday after the United States said it will lift sanctions on Russian aluminium giant Rusal, freeing up supply from one of the world's top producers.
Three-month aluminium on the London Metal Exchange slipped to $1,905.50 a tonne, the lowest since Aug. 4, 2017, and ended down 0.8 percent at $1,912 a tonne.
In April, Washington imposed sanctions on Oleg Deripaska and companies in which he owns stakes, including Rusal and its parent En+, citing "malign activities" by Russia and prompting turmoil in global aluminium markets.
After lobbying by European governments, Washington postponed enforcement of the sanctions and started talks with Deripaska's team on lifting the measures if he ceded control of Rusal.
Deripaska will remain under sanctions, the Treasury said. However, the three Deripaska companies - Rusal, En+ and power firm EuroSibEnergo - have agreed to reduce the oligarch's stakes.
"Rusal will want to sell some aluminium pretty quickly to help its cashflow, it won't hold back because while the Russian state was helping (them), nobody wants to rely on that support for too long," said John Meyer, analyst and partner at SP Angel.
"It is a depressing factor for the price, it's extra metal being sold into an already weak market."
Aluminium hit a near seven-year high when sanctions on Rusal, the world's second largest aluminium producer, were announced, before coming off some 30 percent from the April peaks as exemptions to the measures were introduced.
Commodities strategist Oliver Nugent at Citi said the news was modestly bearish.
"We think there's about 300,000 tonnes of unsold Russian metal, mostly in Europe... (but) we suspect (traders will) gradually feed the metal out. It's not in their interest to crash prices."
He added, however, that U.S. aluminium premiums or surcharges were most exposed to significant price falls as imports of Russian aluminium could recover strongly after falling around 50 percent this year on the Rusal restrictions.
* RUSAL: Rusal's Hong Kong shares rose as much as 26.8 percent to their highest since April after the U.S. Treasury said it will lift sanctions on Rusal.
* LME RESPONSE: The LME said it proposed to reverse its suspension on aluminium produced by Rusal if U.S. sanctions are lifted.
* CHINA ALUMINIUM: China's biggest aluminium producers will hold a meeting on Friday to discuss slumping demand and falling prices, sources said.
* JAPAN ALUMINIUM: The premiums that Japanese buyers pay for aluminium are set to rise to $100-130 a tonne later next year due to tighter global supplies despite an expected return of Rusal supplies, trading house Marubeni said.
* ALUMINIUM SUPPLY: Global primary aluminium output fell to 5.312 million tonnes in November from a revised 5.49 million tonnes in October.
* GLOBAL MARKETS: World equity markets continued a week long slide on Thursday amid investor concerns after the U.S. Federal Reserve indicated it was set on its interest rate-hiking path next year even amid signs global economic growth is stuttering.
* OTHER METALS: Copper ended down 0.3 percent at $6,000, zinc ended flat at $2,540, lead closed up 0.7 percent at $1,978, tin closed up 0.3 percent at $19,320 while nickel ended down 0.4 percent at $10,910.
Additional reporting by Tom Daly; Editing by Adrian Croft and David Evans