The EU's new sanctions on Russia pushed down the oil price ceiling to $47.6, leading to a weekly decline in oil prices as supply and demand imbalances dominated the market.
2025-09-20 09:18:01
Oil prices fell on Friday as concerns about abundant supply and falling demand outweighed expectations that the Federal Reserve's first interest rate cut this year would trigger more consumption. Brent crude futures settled at $66.59 a barrel, down 1.3%. U.S. crude futures settled at $62.36, down 1.5%.
"Oil supplies continue to remain strong, OPEC is tapering its oil production cuts, and we haven't seen the impact of sanctions on Russian crude exports yet," said Andrew Lipow, president of Lipow Oil Associates.
The Federal Reserve cut its policy rate by a quarter percentage point on Wednesday and signaled further cuts to come in response to signs of weakness in the U.S. job market. Lower borrowing costs typically boost demand for oil and push up prices.
John Kilduff, partner at Again Capital, said a future 25 basis point rate cut by the Federal Reserve likely won't boost the oil market because it would further weaken the dollar, making oil more expensive to purchase. The Fed would have to be more aggressive than before; a 50 basis point rate hike is needed to boost demand. Due to underlying market fundamentals, the Fed's actions won't translate into increased demand in the crude oil market.
Lipow also sees an impact on demand. "Refinery maintenance season will further reduce demand," he said.
Citi analysts have a "less bearish than consensus" view on oil prices, predicting Brent crude prices will fall back towards $60 a barrel by the end of this year, a trend that will continue until 2026.
OPEC+'s decision to begin phasing out its second round of production cuts will lead to further expected increases in global inventories, which Citi currently projects will rise by 1.1 million barrels per day in 2025 and 2.1 million barrels per day in 2026. In their quarterly outlook, the analysts stated that their bearish scenario, which could push Brent crude prices towards $50, could occur if global demand contracts due to weakening macroeconomics and trade, while supply grows faster than expected. A less likely bullish scenario, with Brent crude prices above $75, would be driven by geopolitical events, such as an attack on Russian infrastructure or escalating tensions between Israel and Iran.
The European Union announced its 19th package of sanctions against Russia on Friday, targeting the banking sector, oil tankers and buyers of Russian oil, while also lowering the crude oil price ceiling. European Commission President Ursula von der Leyen said on Friday that the crude oil price ceiling had been reduced to $47.6 per barrel.
Robert Yawger of Mizuho said this week that the 18 previous rounds of EU sanctions imposed since the Russia-Ukraine conflict in 2022 "have been largely ineffective in stopping Russian oil exports."
Ukrainian President Volodymyr Zelensky on Friday welcomed the European Union's 19th package of sanctions against Russia, saying the measures would have a significant impact on the Russian economy.
"It targets the main drivers of the war economy: energy revenues, finance, high-tech resources and the military-industrial base," Zelensky wrote on Telegram. "This is an important step that will increase pressure on the Russian war machine and produce tangible results."
In a package presented on Friday, European Commission President Ursula von der Leyen said she wanted to end the three-and-a-half-year conflict and "give peace a real chance" by persuading Russia to sit down at the negotiating table.
Von der Leyen said the European Commission wants a complete ban on liquefied natural gas imports from Russia.
She noted that all transactions with large Russian energy companies such as Rosneft and Gazprom Neft would be banned.
EU High Representative for Foreign Affairs and Security Policy Kallas said the sanctions, aimed at "attacking Russia's sources of finance," include designating 118 new vessels as part of a shadow fleet and measures against Russia's circumvention of financial sanctions in third countries. Member states must now discuss the package and then adopt it unanimously.
Soojin Kim of MUFG said crude oil prices have been stuck in a narrow range since early August, weighed down by bearish fundamentals such as OPEC+'s accelerated production recovery. However, market concerns persist about potential disruptions to Russian supply following recent attacks on key energy infrastructure in Ukraine and U.S. President Trump's call for NATO allies to halt purchases of Russian oil.
In addition, US President Trump said on Thursday that the Russia-Ukraine conflict would end if oil prices were lower. ANZ Research analysts said in a research report that US President Trump's remarks that he prefers low oil prices to sanctions on Russia have eased concerns about supply disruptions. Analysts believe that Trump's statement shows that he hopes to limit Russia's income from the oil industry to support its war against Ukraine.
"Oil supplies continue to remain strong, OPEC is tapering its oil production cuts, and we haven't seen the impact of sanctions on Russian crude exports yet," said Andrew Lipow, president of Lipow Oil Associates.
The Federal Reserve cut its policy rate by a quarter percentage point on Wednesday and signaled further cuts to come in response to signs of weakness in the U.S. job market. Lower borrowing costs typically boost demand for oil and push up prices.
John Kilduff, partner at Again Capital, said a future 25 basis point rate cut by the Federal Reserve likely won't boost the oil market because it would further weaken the dollar, making oil more expensive to purchase. The Fed would have to be more aggressive than before; a 50 basis point rate hike is needed to boost demand. Due to underlying market fundamentals, the Fed's actions won't translate into increased demand in the crude oil market.
Lipow also sees an impact on demand. "Refinery maintenance season will further reduce demand," he said.
Citi analysts have a "less bearish than consensus" view on oil prices, predicting Brent crude prices will fall back towards $60 a barrel by the end of this year, a trend that will continue until 2026.
OPEC+'s decision to begin phasing out its second round of production cuts will lead to further expected increases in global inventories, which Citi currently projects will rise by 1.1 million barrels per day in 2025 and 2.1 million barrels per day in 2026. In their quarterly outlook, the analysts stated that their bearish scenario, which could push Brent crude prices towards $50, could occur if global demand contracts due to weakening macroeconomics and trade, while supply grows faster than expected. A less likely bullish scenario, with Brent crude prices above $75, would be driven by geopolitical events, such as an attack on Russian infrastructure or escalating tensions between Israel and Iran.
The European Union announced its 19th package of sanctions against Russia on Friday, targeting the banking sector, oil tankers and buyers of Russian oil, while also lowering the crude oil price ceiling. European Commission President Ursula von der Leyen said on Friday that the crude oil price ceiling had been reduced to $47.6 per barrel.
Robert Yawger of Mizuho said this week that the 18 previous rounds of EU sanctions imposed since the Russia-Ukraine conflict in 2022 "have been largely ineffective in stopping Russian oil exports."
Ukrainian President Volodymyr Zelensky on Friday welcomed the European Union's 19th package of sanctions against Russia, saying the measures would have a significant impact on the Russian economy.
"It targets the main drivers of the war economy: energy revenues, finance, high-tech resources and the military-industrial base," Zelensky wrote on Telegram. "This is an important step that will increase pressure on the Russian war machine and produce tangible results."
In a package presented on Friday, European Commission President Ursula von der Leyen said she wanted to end the three-and-a-half-year conflict and "give peace a real chance" by persuading Russia to sit down at the negotiating table.
Von der Leyen said the European Commission wants a complete ban on liquefied natural gas imports from Russia.
She noted that all transactions with large Russian energy companies such as Rosneft and Gazprom Neft would be banned.
EU High Representative for Foreign Affairs and Security Policy Kallas said the sanctions, aimed at "attacking Russia's sources of finance," include designating 118 new vessels as part of a shadow fleet and measures against Russia's circumvention of financial sanctions in third countries. Member states must now discuss the package and then adopt it unanimously.
Soojin Kim of MUFG said crude oil prices have been stuck in a narrow range since early August, weighed down by bearish fundamentals such as OPEC+'s accelerated production recovery. However, market concerns persist about potential disruptions to Russian supply following recent attacks on key energy infrastructure in Ukraine and U.S. President Trump's call for NATO allies to halt purchases of Russian oil.
In addition, US President Trump said on Thursday that the Russia-Ukraine conflict would end if oil prices were lower. ANZ Research analysts said in a research report that US President Trump's remarks that he prefers low oil prices to sanctions on Russia have eased concerns about supply disruptions. Analysts believe that Trump's statement shows that he hopes to limit Russia's income from the oil industry to support its war against Ukraine.
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