By Barani Krishnan
Investing.com — The volatility in oil isn't going away as growing worries over Europe's third wave of COVID-19 overwhelmed risks to the global crude trade from a tanker jam on the Suez Canal.
Crude prices settled down 4%, resuming their slide after Wednesday’s 6% leap recouped almost all what the market lost in the previous session.
Oil has been on a roller coaster ride since last Thursday when it plunged 7% on Europe's pandemic concerns, bring an abrupt turn to a market that until then had gone almost one way for four months — up.
“The oil price ‘super’ cycle rhetoric is finally getting a bit of a reality check,” Louise Dickson, oil-markets analyst at consulting firm Rystad Energy, said in a statement.
New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled down $2.62, or 4.3%, at $58.01. That was just 25 cents above where it ended Tuesday, when it fell 6%.
London-traded Brent, the global benchmark for crude, settled down $2.61, or 4.1%, at $61.80. That was just a penny above where it closed after Tuesday's rout.
Few could make immediate sense of Thursday's renewed downturn on the market. Some viewed the crisis on the Suez Canal as negative to oil demand, although the delay to crude shipments on the waterway should logically be positive to oil prices.
The Suez Canal is jammed after powerful winds forced Ever Given — a Panama-flagged, Taiwanese-operated and Japanese-owned ship — aground on one of its banks. The blockade has disrupted one of the world’s most important maritime arteries, through which roughly 10% of global shipping traffic passes.
As of Thursday morning, hundreds of ships were stuck at each end of the 120-mile Suez Canal which connects the Red Sea to the Mediterranean. A salvage ship was, meanwhile, working to free the Ever Given tanker, which diagonally is said to be as long as the height of New York's Empire State Building.
Shipping insurer Lloyds (LON:LLOY) said the grounding of a similar-sized ship in 2016 (the 19,000 teu CSCL Indian Ocean on the Elb) in 2016 took six days to refloat.
Many others blamed the renewed slump in crude prices on worries over Europe’s Covid-19 situation, especially after France announced on Thursday a new lockdown in its Paris vicinity.
A third wave of coronavirus infections is raging across Europe, with the British variant (B117) dominating. The World Health Organization said the number of cases on the continent had risen on average by 12% in a week, and in some countries the rise has been much larger.
There is also a growing sense of chaos in the Eurozone's response to the pandemic after Germany and France suspended the use of the AstraZeneca (NASDAQ:AZN) vaccine earlier in the week, worsening the region's lag behind the rest of the world in getting vaccinated. The U.K. and the bloc, however, agreed on Thursday to work together on vaccines ahead of an EU summit later in the day.