WTI ends below $95 on EU’s adjusted arrangements for Russian oil

US crude oil prices stabilized below $95 per barrel for the first time since April in choppy trading circumstances on Friday after the European Union announced it would allow Russian companies to ship oil to third countries under an adjustment of sanctions agreed by member states this week. Under the new arrangements for Russia’s oil that came into force on Friday payments related to purchases of Russian crude oil sea shipments by EU companies will not be banned.

WTI settled $1.65, or 1.7%, lower at $94.70 a barrel, while Brent crude futures fell 66 cents, or 0.6%, to $103.20. WTI closed lower for the third straight week, fell over the past two sessions after data showed that US gasoline demand had dropped nearly 8% from a year earlier in the midst of the peak summer driving season, hit by record prices at the pump.

In contrast, signs of strong demand in Asia propped up the Brent benchmark, which settled higher for the first time in six weeks.

Money managers raised their net long US crude and Brent futures and options positions in the week to July 19, the US Commodity Futures Trading Commission (CFTC) and Intercontinental Exchange showed.

Trading in oil futures has been volatile in recent weeks as traders try to reconcile possibilities of further interest rate hikes that could cut demand against tight supply from the loss of Russian barrels.

Russian companies Rosneft and Gazprom will be able to ship oil to third countries in a bid to limit the risks to global energy security.

The EU announcement comes after Russian Central Bank Governor Elvira Nabiullina said it will not supply crude to countries that decide to impose a price cap on its oil and instead redirect it to countries which are ready to “cooperate” with Russia.

Perceptions are growing that the US and EU will implement price caps on Russian oil by year end. Past history shows that government-induced price caps on commodities are usually short lived and can result in exaggerated prices soon after.

Prices, however, were held back by worries of interest rate hikes that could slash demand and the resumption of some Libyan crude oil output.

Libya’s oil production is at more than 800,000 barrels per day (bpd) and will reach 1.2 million bpd by next month, the Libyan oil ministry said. Iraq has the capacity to increase its oil production by 200,000 bpd this year if asked, an executive of Iraq’s Basra Oil Co said.

US oil rigs, an early indicator of future output, remained steady at 599 this week, according to data from energy services firm Baker Hughes.

The global economy looks increasingly likely to be heading into a serious slowdown, just as central banks aggressively reverse ultra-loose monetary policy adopted during the pandemic to support growth, data showed on Friday.