Oil prices recover, fueled by long term Suez Canal blockage fears

Photo: AP

International oil prices recovered at the end of the week amid fears that Suez Canal may remain blocked for weeks, delaying a large number of cargo ship traffic, Reuters reported. Prices, however, were still headed for a third consecutive weekly loss.

Brent crude edged higher to $62.38 a barrel on Friday, up by 3.8% on Thursday. 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.

“Expectations that the blockage of the Suez Canal may last for weeks raised fears of supply tightness in oil markets,” Nissan Securities researcher Yasushi Osada told Reuters.“But lingering worries that a fresh wave of lockdowns in Europe and elsewhere may slow a recovery of global fuel demand are expected to limit price gains,” he said.

Countries in Europe are renewing restrictions to curbthe spread of Covid-19, which will likely reduce fuel demand from the region. Germany, Europe’s largest economy, has seen its biggest increase in coronavirus cases since January.

The oil market was also under pressure as producers haddifficulty selling to Asia, especially China. Asian buyersinstead took cheaper oil from storage while refinery maintenancehas reduced demand, industry sources said.

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