Oil prices rebound on fears Suez Canal blockage may last weeks

Oil prices surged more than four percent on Friday, over mounting fears that it will take weeks to refloat Ever Given, a mega-container ship stranded in Egypt’s Suez Canal.

Brent crude, the international benchmark, increased 4.36 per cent, to $64.67 per barrel at 18:17 GMT on Friday, after plummeting 3.8per cent on Thursday. The U.S. West Texas Intermediate (WTI) crude rose 4.27 per cent, to $61.06 a barrel, having tumbled 4.3 percent a day earlier.

Prices have been volatile this week as countries in Europe are renewing restrictions to curb the spread of COVID-19, which will likely reduce fuel demand from the region.

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

The 200,000-tonne ship is the length of four football pitches and one of the world’s biggest container vessels, capable of carrying 20,000 containers.

Kpler, a leading provider of intelligence solutions for commodity markets, said 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. Also 1.54 million bpd of refined oil products such as gasoline and diesel fuel flow through the canal, about 9 percent of global seaborne product trade.

Lloyd List, a shipping expert, said the blockage is delaying an estimated $9.6 billion (N3.93 trillion) of goods per day, putting Suez Canal’s westbound traffic at roughly $5.1 billion per day, and eastbound daily traffic at around $4.5 billion.

According to the Lloyd’s List tracking data, there are more than 160 vessels waiting at either end of the canal. These include 41 bulk carriers and 24 crude tankers.

Meanwhile the Egypt’s Suez Canal Authority (SCA) said it was doing all it could to refloat the ship with tug boats, dredgers and heavy earth-moving equipment.

The suspension of movement through the narrow the channel has worsened problems for shipping lines that are already facing disruption and delays in supplying retail goods to consumers due to the COVID-19 pandemic.