Crude-oil futures were trading higher Friday as a 220,000 ton cargo ship blocked the Suez Canal for a fourth straight day and efforts to dislodge the world’s largest container vessel from the critical trade waterway have proved unsuccessful.
The narrow canal is a crucial chokepoint for Persian Gulf oil and uncertainty about how long it will take to remove the tanker have complicated the near-term outlook for energy assets.
On top of that, energy traders are struggling with extended business lockdown in parts of Europe to combat the coronavirus pandemic, implying less demand for energy products.
Those two events have been whipsawing crude prices, which have been vulnerable to headline news after both the U.S. and international benchmark oil contracts fell into correction earlier this week, defined as a drop of at least 10% from a recent peak.
“Today the market is up again as traders in a change of heart decided that the Suez Canal blockade is actually becoming more significant for oil flows and supply deliveries than they previously concluded,” wrote Paola Rodriguez Masiu, Rystad Energy’s vice president of oil markets.
“The oil market is swinging wildly from gains to losses and gains again this week, a clear sign of the uncertainty that the Suez Canal blockade and European lockdowns are creating,” Masiu said.
West Texas Intermediate crude for May delivery
the U.S. benchmark, was trading $1.08, or 1.9%, higher at $59.65 a barrel on the New York Mercantile, after falling 4.3% on Thursday. Prices gave up much of the 5.9% rise seen on Wednesday.
May Brent crude
was trading $1.24, or 2%, higher at $63.04 a barrel on ICE Futures Europe, following a 3.8% skid a day ago. The global benchmark saw a 6% rise on Wednesday.
“This is not a usual week for oil, that’s for sure,” he said. “The turbulence of oil prices is making trading unpredictable as market participants are at a crossroad, trying to pick what’s more significant, bullish transport disruptions or bearish European lockdowns.”
For the week, both contracts are on pace for a weekly gain of over 2% based on the most-active contracts.
It’s unclear how long the Suez Canal blockage will remain but some experts are predicting weeks rather than days. “This now looks like it will take a few weeks,” Anoop Singh, the Singapore-based head of tanker analysis at shipping broker Braemar ACM, was quoted by the Wall Street Journal as saying.
An estimated 10% of total seaborne oil trade passes through the Suez Canal which connects the Red Sea with the Mediterranean Sea.
Reuters reported that the owner of the MV Ever Given container ship, Shoei Kisen, denied speculation that it could be removed as early as Saturday night, which would have set the stage for downdraft in energy prices.