OIL gains 2% 📈

Oil prices rebound slightly on Friday, though the market remains cautious. Investors are evaluating potential new sanctions on Russian crude, offset by rising OPEC+ output and forecasts of lower global demand. The European Commission has proposed replacing the current $60/barrel price cap on Russian oil with a floating mechanism as part of the EU’s 18th sanctions package, which is still being developed. According to Bloomberg sources:

• The EU is considering lowering the cap to $50 per barrel, setting it 15% below average market prices from the past 10 weeks.

• The new system would feature automatic quarterly adjustments, aiming to maintain long-term pressure on Russia.

• Greece, Malta, and Cyprus, previously opposed without G7 backing, are now open to negotiations.

• Slovakia is currently blocking the sanctions package, seeking concessions on Russian gas.

Some EU states want to proceed even without full U.S. support, although Trump’s backing would enhance legitimacy. Discussions continue as unanimity among all member states is still required.

Additional Market Drivers

• Seasonal demand is rising, while Houthi attacks in the Red Sea continue to disrupt trade routes.

• OPEC+ will increase output by 548,000 barrels/day from August, with another hike possible in September.

• OPEC has revised down its global oil demand forecast for 2026–2029, citing a slowdown in China. Demand for 2026 is now expected at 106.3 million bpd, lower than earlier projections.

• Still, Saudi Arabia plans its largest oil shipment to China in over two years, signaling resilient demand.

Sanctions in Focus

The main bullish driver appears to be the EU’s new mechanism and speculation over possible new U.S. sanctions on Russian oil. Initial signs of Washington-Moscow thaw had raised hopes for easing sanctions, but Putin’s hardline stance and the lack of consensus on Ukraine seem to be worsening tensions with Trump’s administration.

Trump has repeatedly threatened tough sanctions on Russia if no agreement on Ukraine is reached. This has increased the likelihood of further restrictions on Russian commodities, especially oil, a key revenue source. The EU also appears more determined to pursue stricter sanctions.

If implemented, Europe’s new cap mechanism could significantly reduce the availability of Russian crude on global markets. A lower cap (e.g., $50) could curb supply and push prices higher if Russia deems exports unprofitable under new terms.

Conversely, if the final mechanism remains mild, with the cap above Russia’s real export price, the overall impact could be neutral. Still, even the prospect of a more dynamic EU approach has already triggered speculative moves in oil futures.

Oil (Daily Interval)

Crude prices are breaking above the 50-day EMA (orange line) on the daily chart, signaling a potential return to an uptrend after a recent stabilization phase. This follows steep sell-offs triggered by easing Middle East tensions and the Israel-Iran ceasefire.

Source: xStation5