Oil prices ended the week lower on Friday after the European Union said it would allow Russian state-owned companies to ship oil to third countries as part of a sanctions adjustment agreed by member states this week.
Brent crude, the benchmark for two-thirds of the world’s oil, ended Friday down 0.6% at $103.20 a barrel. However, it posted a weekly gain for the first time in six weeks on signs of strong demand in Asia.
West Texas Intermediate, the gauge that tracks U.S. crude, slid 1.7% to $94.70 a barrel. WTI, in particular, has been battered over the past two sessions after data showed US gasoline demand fell nearly 8% from a year earlier amid the peak driving season. summer, hit by record prices at the pump.
“Despite worrying signs of crude demand in China, Europe and the United States, the oil market remains very tight and does not allow WTI crude to fall below the $90 mark,” said Ed Moya, senior analyst. of the market at Oanda.
Oil futures trading has been volatile in recent weeks as traders try to balance the possibilities of further interest rate hikes that could reduce demand in the face of tight supply due to the loss of Russian barrels.
Earlier this week, oil prices rose around 5% following US President Joe Biden’s visit to the Middle East and tight market conditions.
Russian state-owned companies Rosneft and Gazprom will be able to ship oil to third countries in a bid to limit risks to global energy security.
Under changes to sanctions against Russia that took effect on Friday, payments related to purchases of Russian crude oil transported by European companies would not be prohibited.
“In the short term, it’s definitely a negative headline that’s probably given us a bit of a sell-off here,” said Price Futures Group analyst Phil Flynn.
The EU announcement comes after Russian central bank governor Elvira Nabiullina said it would not supply crude to countries that decide to impose a price cap on its oil and would instead redirect it to countries ready to “cooperate” with Russia.
U.S. oil rigs, an early indicator of future production, were flat at 599 this week, according to data from Texas-based energy services company Baker Hughes.
The global economy appears to be heading for a serious slowdown, just as central banks are aggressively reversing the ultra-loose monetary policy adopted during the pandemic to support growth, data showed Friday.
Recent developments in crude oil futures and interest rates anticipate a slowdown in the economic cycle that will lead to lower oil consumption before the end of the year and in the first three months of 2023.
Investors were also awaiting the US Federal Reserve’s interest rate decision next week. Fed officials said the central bank would likely raise rates by 75 basis points at its July 26-27 meeting.
Updated: July 23, 2022, 07:35