Oil rises 4% on fear that the Suez Canal blockade will last for weeks

NEW YORK (Reuters) – Oil prices rose more than 4% on Friday on concerns that global supplies of crude and refined products will be disrupted for weeks as workers try to dislodge a giant container ship blocking the Canal. Suez.

It was a rebound from a sharp drop in the previous session on concerns that new coronavirus lockdowns in Europe will hurt demand.

Brent crude rose $ 2.62, or 4.2%, to settle at $ 64.57 a barrel, after falling 3.8% on Thursday. US West Texas Intermediate (WTI) crude gained $ 2.41, or 4.1%, to settle at $ 60.97 a barrel, after falling 4.3% the previous day.

Brent rose 0.1% over the past week, while WTI fell 0.7%, its third weekly loss.

Oil trading was volatile this week as traders weighed the potential impact of the Suez Canal lockdown that occurred on Tuesday against the effect of new coronavirus lockdowns.

“Today the market has risen again when traders, with a change in attitude, decided that the blockade of the Suez Canal is actually becoming more significant for oil flows and supply deliveries than they had previously concluded.” said Paola Rodríguez Masiu, vice president of oil markets at Rystad Energy.

The Suez Canal stepped up its efforts on Friday to free the stuck mega-ship, after an earlier attempt failed. Efforts to release it can take weeks, with possible complications due to unstable weather.

Of the 39.2 million barrels per day (bpd) of total crude transported by sea in 2020, 1.74 million bpd passed through the Suez Canal, according to data intelligence firm Kpler. In addition, 1.54 million bpd of refined oil products flow through the canal, about 9% of world trade in oil products transported by sea, Kpler said.

On Friday, there were 10 vessels waiting at the Canal entry points carrying about 10 million barrels of oil, Kpler said.

Recovering from the blockade on the Suez Canal, shipping rates for oil product tankers have nearly doubled this week and several vessels were diverted.

Oil markets were also driven by concerns about escalating geopolitical risk in the Middle East. Yemen’s Houthi forces said on Friday they launched attacks on facilities owned by Saudi Aramco.

Prices were also supported by expectations that the Organization of the Petroleum Exporting Countries and its allies will maintain lower output.

Goldman Sachs said it expects OPEC + to keep production unchanged by May when the group meets next week, “with a still large increase of 3.4 million barrels per day expected in September.”

Acting a week before the OPEC + meeting, the Abu Dhabi National Oil Company (ADNOC) has deepened crude oil supply cuts to Asian customers in June to 10% -15% from 5% -15. % in May, various sources said.

In the United States, the number of rigs drilling for oil increased by six this week to 324, data from oil services firm Baker Hughes showed.

Still, the potential negative effect on demand from the coronavirus pandemic loomed. The third German wave of the coronavirus could become the worst yet and the possibility of 100,000 new infections a day is not ruled out, said the director of the German Institute Robert Koch (RKI).

Reporting by Stephanie Kelly in New York; Additional reporting by Shadia Nasralla in London Yuka Obayashi in Tokyo. Edited by Marguerita Choy, Mark Potter and David Gregorio


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