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Oil prices rise 2% on fears Suez blockage may last weeks

Commodities Mar 26, 2021 05:50AM ET
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3/3 © Reuters. FILE PHOTO: Container ship runs aground in Suez Canal, blocks traffic 2/3
 
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By Yuka Obayashi

TOKYO (Reuters) -Oil prices reversed a sharp sell-off a day earlier to rise about 2% on Friday on mounting fears that it could take weeks to dislodge a giant container ship blocking the Suez Canal, which would squeeze supplies of crude and refined products.

Prices, however, were still headed for a third consecutive weekly loss, with the outlook for demand dented by fresh coronavirus lockdowns in Europe.

Brent crude was higher by $1.09, or 1.8%, at $63.04 a barrel by 0750 GMT, after dropping 3.8% on Thursday.

U.S. West Texas Intermediate (WTI) crude was up

$1.22, or 2.1%, at $59.78 a barrel, having tumbled 4.3% a day earlier.

Both benchmarks were on track for a small weekly loss, following a more than 6% decline last week.

The trapped container ship is blocking traffic in the Suez Canal, one of the world's busiest shipping channels for oil and refined fuels, grain and other trade between Asia and Europe.

Officials stopped all ships entering the canal on Thursday, and a salvage company said the vessel may take weeks to free.

"Fears of supply tightness grew as the key Suez Canal remained blocked by the giant ship, outweighing concerns over weak demand due to lockdowns in Europe and Asia," said Satoru Yoshida, a commodity analyst with Rakuten Securities.

Of the 39.2 million barrels per day (bpd) of total seaborne trade in crude in 2020, 1.74 million bpd went through the Suez Canal, according to tanker tracking firm Kpler. Additionally, 1.54 million bpd of refined oil products such as gasoline and diesel fuel flow through the canal, about 9% of global seaborne product trade, Kpler said.

Reeling from the blockage in the Suez Canal, shipping rates for oil product tankers have nearly doubled this week, and several vessels were diverted away from the vital waterway as a giant container ship remained wedged between both banks.

The oil markets were also lifted by worries over escalating geopolitical risk in the Middle East. Yemen's Houthi forces on Friday said that they launched attacks a day earlier on Saudi Arabia targeting facilities owned by state-owned oil company Saudi Aramco (SE:2222) and military sites.

Expectations that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, will likely maintain their lower production also supported prices, Nissan (OTC:NSANY) Securities researcher Yasushi Osada said.

The producer group is scheduled to meet on April 1 to decide on May supplies, and OPEC+ sources told Reuters they expected the producer group to broadly stick to current lower levels, as the outlook for demand has deteriorated due to new lockdowns in Europe.

Acting a week ahead of the OPEC+ meeting, 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, several sources with knowledge of the matter said on Thursday.

Oil prices rise 2% on fears Suez blockage may last weeks
 

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Comments (10)
Dave Jones
Dave Jones Mar 26, 2021 5:23AM ET
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inflationary much?
Tyler Phillis
Tyler Phillis Mar 26, 2021 5:23AM ET
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No, not inflationary...a supply disruption. Inflation is strictly a monetary related concept.
perplexed76 .
perplexed76 . Mar 26, 2021 5:09AM ET
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oil smart gamblers can't decide if it is good for oil or bad.
Notvery Goodathis
Peteymcletey Mar 26, 2021 12:07AM ET
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Tankers benefit the most
Gene Kret
Gene Kret Mar 25, 2021 11:56PM ET
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All is well remain calm.....”Animal House” if they dont get the canal open in 3 days ....hellow $80 oil👍🏻👍🏻👍🏻👍🏻👍🏻
Brian Poland
Brian Poland Mar 25, 2021 11:15PM ET
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If this is the reason oil up then everyone should short it. Fake news
Meru Pet
Meru Pet Mar 25, 2021 11:15PM ET
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for sure Egypt wants this to go fast...
Mark Henline
Mark Henline Mar 25, 2021 11:10PM ET
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there are no accidents!
Tyler Phillis
Tyler Phillis Mar 25, 2021 11:10PM ET
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That depends on your context; pessimists believe none happen, optimists believe every thing is one, while rational adults know they happen.
Allen Drewe
Allen Drewe Mar 25, 2021 11:08PM ET
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This shouldnt prop up oil prices. Still in down trend
Keng He
Keng He Mar 25, 2021 11:08PM ET
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also us doesn't want oil to be up because of inflation worry
Steve Lora
Steve Lora Mar 25, 2021 10:18PM ET
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Biden is Jimmy Carter
Dave Jones
Dave Jones Mar 25, 2021 10:18PM ET
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Jimmy's much sharper! even Reagan's exhumed corpse has more wit!
Joel Schwartz
Joel Schwartz Mar 25, 2021 10:04PM ET
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The timing of this “accident” is very sus
Ronald Warren
Ronald Warren Mar 25, 2021 10:04PM ET
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You're right. Saudi Arabia wants their oil back to 80.
perplexed76 .
perplexed76 . Mar 25, 2021 10:04PM ET
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Ronald Warren  it's more like putin's style
Kris GE
Kris GE Mar 25, 2021 10:04PM ET
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perplexed76 . LOL, I think you forgot. It's President Trump fault:))
Meru Pet
Meru Pet Mar 25, 2021 10:04PM ET
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this accident makes also the USA more central. Not saying it's them...
Ronald Warren
Ronald Warren Mar 25, 2021 9:40PM ET
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You notice how most sectors are running haywire!! Up, Down, All over!!! It's unstable and we're reaching "Critical Mass!"
 
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