Oil drops after Ever Given container ship blocking the Suez Canal is refloated

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The Ever Given was partially refloated on Monday

Oil prices fell on Monday and traders breathed a sigh of relief after the giant container ship Ever Given that has blocked the Suez Canal for almost a week was refloated.

Brent crude oil, the global benchmark price, fell as much as 2% before recovering somewhat to stand 0.6% lower at $64.03 a barrel on Monday morning. WTI crude was down 1.1% to $60.30 a barrel.

The fall in oil prices was a sign that the pressure on global supply chains is set to ease, with the local authorities saying they will act fast to try to clear the backlog of ships at the crucial trade route.

The Suez Canal Authority said on Monday the Ever Given ship, which has been lodged lengthways in the canal for almost a week, had been successfully refloated and brought away from the shore. It said the ship was not yet completely free, however.

It added: “Navigation shall be resumed immediately upon the complete restoration of the vessel’s direction.”

The Ever Given, an enormous container ship almost the length of the Empire State Building, has been stuck in the canal since Tuesday, completely blocking the route and snarling up global trade.

Almost 15% of world shipping goes through the Suez Canal, which cuts through Egypt from the Mediterranean to the Red Sea.

The blockage sent oil prices sharply higher, as backlogs of energy shipments built up. Brent crude had fallen to close to $60 a barrel on Monday, but rose near $65 over the week.

Other factors affected oil prices too, however, with uncertainty surrounding demand as economies recover and a meeting of the Opec oil cartel and its allies later this week.

“Brent has been trading soft in the morning session today after reports emerged that the ship blocking the Suez Canal has been refloated though it’s still unclear how soon the trade route could be reopened,” Warren Patterson, head of commodities strategy at Dutch bank ING, said.

Jefferies analyst David Kerstens said the Suez blockage would worsen global trade, which has already been disrupted by the coronavirus crisis.

He said shipping capacity on the Asia-Europe route will be “temporarily reduced by c.25%, while port congestion is set to further increase, in a market already characterised by supply chain bottlenecks and equipment shortages, which has resulted in record-high freight rates.”

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Oil climbs 4% after a grounded container ship blocks key Suez Canal trade route

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The tanker is blocking the Suez Canal.

  • Crude oil prices climbed as much as 4% on Wednesday to roughly $60 per barrel, boosted by concern over a supply bottleneck.
  • A container ship is blocking the Suez Canal, which is one of the busiest trade routes in the world.
  • Oil prices have been highly volatile throughout the pandemic and lockdown cycles.
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Oil rose as much as 4% on Wednesday after a huge container ship ran aground and blocked the Suez Canal, a key shipping route for crude and refined products. The blockage raised some concern about fuel supply.

Overall, the price of oil is set to fall for the third consecutive week this week. Another round of lockdowns in Europe could threaten the recovery in demand growth and have undermined some of the recent strength in the oil market.

One of the biggest container ships in the canal ran aground early on Tuesday and is stuck at a right-angle to the passage. Hundreds of cargo ships are now unable to pass through the canal, forcing them to divert their routes. It is unclear when the issue will be resolved. “This could have an impact on movement of oil and consumer goods.” Deutsche Bank strategist Jim Reid said in a daily report.

Throughout the pandemic and subsequent cycles of lockdowns and travel bans, oil prices have been highly volatile. Over the last 12 months, Brent crude oil prices have fluctuated from as little as $16 a barrel to as much as $71. As demand for oil, and therefore its price, is inherently linked to sectors that are impacted heavily by lockdown measures, such as travel, they have been sensitive to the developments of the pandemic. Over the last two weeks, prices have fallen by around 12% and are still on course for a third weekly fall, in spite of Wednesday’s rally.

The price response to the hold-up at the Suez Canal may not reflect expectations for a prolonged improvement in demand, analysts said. The futures market has eliminated a bullish structure known as “backwardation” – where prompt contracts trade at a premium to further-out futures contracts, which reflects bullishness among traders and investors about the demand outlook.

“The reprieve seems temporary, though, as the spot price fall overnight has completely removed the backwardation in the oil futures market for prompt deliveries. With speculative markets still long, it seems, oil is likely to be a sell on rallies until Covid-19 and economic recovery sentiment swings back into the black.” Jeffrey Halley, senior market analyst at OANDA, said.

Read more: MORGAN STANLEY: Buy these 10 stocks quickly that will roar higher as M&A heats up – including one with a potential upside of 114%

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Oil surges 5% following reports OPEC+ will extend production cuts through April

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Workers extract oil from wells in the Permian Basin in Midland, Texas.

  • Oil prices surged by more than 5% after OPEC and its allies reportedly agreed to keep output levels steady. 
  • Saudi Arabia committed to sticking with a voluntary oil supply cut of 1 million barrels per day.
  • The supply decision by OPEC+ is “incredibly bullish” for the oil market, says one analyst.  
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Oil prices soared Thursday in the wake of reports that major oil producers have agreed to keep their supply cuts intact through next month.

OPEC and its allies had been discussing whether or not to restore as much as 1.5 million barrels a day of oil production. The group ultimately decided that it will leave output at current levels, according to a Bloomberg report

Saudi Arabia, meanwhile, committed to extend its voluntary cut of 1 million barrels of oil per day. The oil market officials meet via video-conference. The discussion took place at a time when recovery in the oil market is still taking hold after a plunge in demand because of the COVID-19 pandemic. 

Prices for Brent crude, the international benchmark, jumped as much as 5.3% to an intraday high of $67.47, with the gain later trimmed to 4.7%.

The decision by OPEC+ was “incredibly bullish,” and Saudi Arabia’s decision “was shocking as it leaves them vulnerable to losing market share next month when the oil market is in deficit by a couple million barrels,” said Edward Moya, senior market analyst at Oanda, in a note.

West Texas Intermediate oil futures also popped up as much as 5.3% to an intraday high of $64.51. The continuous contract was later up by 4.6%.

The Energy Select Sector SPDR exchange-traded fund climbed 3.8% and the United States Oil Fund, a popular oil ETF, moved up 6%.

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US oil and natural gas prices rise as freezing temperatures leave millions without power in Texas

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Temperatures have plunged in Texas, causing energy prices to spike

US oil and natural gas prices rose on Tuesday, as freezing cold weather battered Texas’s energy infrastructure, leaving millions without power.

WTI crude oil was up 0.52% to $59.77 per barrel as of 6.10am ET. That was just off a more than one-year high of more than $60.80 touched on Monday as plunging temperatures hit Texan oil plants.

Natural gas futures were up 5.8% to $3.079 per million British thermal units on Tuesday, trading at around the highest levels since November.

More than 3 million people have been left without power in Texas and close to 5 million around the US as a whole, according to poweroutage.us, as a rare winter storm sweeps the country.

Temperatures fell to 4F (-16C) overnight in Dallas, Texas, and have plunged across Oklahoma, Kansas, New Mexico, Colorado and elsewhere.

It has been challenging for Texas’s energy grid, which does not pay generators to keep capacity in reserve. The weather has forced many generators to stop production.

Read More: EXCLUSIVE: An asset manager overseeing nearly $100 billion divested from Exxon on concerns it is failing to move fast enough to address climate change

Wholesale energy prices have skyrocketed, at times above the market cap of $9,000 per megawatt hour, compared to prices of around $25 to $50 per MWh before the winter storms.

The frigid temperatures have hit oil production and natural gas supplies and led to a surge in demand for energy, causing prices to spike.

Heating oil futures – a proxy for diesel – were up 2.58% to $1.817 per gallon on Tuesday morning. Gasoline futures were up 4.11% to $1.7621 a gallon.

Texas is also home to some of the country’s biggest oil refineries, as well as the heart of the shale basin. 

Jeffrey Halley, senior market analyst at currency firm Oanda, said he thought the US oil market had been due a correction after a surge in prices in recent weeks. But he said the current weather situation “will likely continue to offset that.”

Read More: GOLDMAN SACHS: These 40 heavily shorted stocks could be the next GameStop if retail traders target them – and the group has already nearly doubled over the past 3 months

“Until the weather moderates in the United States… oil is a ‘buy on dips’ in the short-term.”

Brent crude oil, the international benchmark, was down 0.33% to $63.11 a barrel, still around a one-year high.

JPMorgan last week predicted a commodities “supercycle” would take hold in 2021, as economies reopen and drive up production and demand for energy.

The “roaring 20s” will be accompanied by easy monetary and fiscal policy, a weak US dollar and stronger inflation, all supportive for commodity prices, JPMorgan said.

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