Oil Jumps By Over 4% As Concern Shifts Again To Blocked Canal

Meanwhile, Saudis plan deterrent actions against Houthi attacks: File Image/Pixabay

Worry-plagued crude trades on Friday shifted their concerns from the Europe Covid lockdowns back to the container ship blocking the Suez Canal, on word that global supplies of crude and refined products could be disrupted for weeks; as a result, oil prices rebounded over 4 percent.

Brent rose $2.62, or 4.2 percent, to settle at $64.57 per barrel; for the week it rose 0.1 percent.

West Texas Intermediate gained $2.41, or 4.1 percent, to settle at $60.97 per barrel; it declined 0.7 percent, its third weekly loss.

Kpler dispelled earlier assumptions from the analytical community that the Canal is no longer very important to global oil trade, by noting that of the 39.2 million barrels per day (bpd) of total seaborne crude in 2020, 1.74 million bpd went through the Canal, and 1.54 million bpd of refined oil products flow through the canal, or about 9 percent of global seaborne oil product trade.

Ten vessels waited at the entry points of the Canal carrying around 10 million barrels of oil on Friday, and experts fear unstable weather may result in a weeks-long rescue attempt.

Meanwhile, while much has been made of the renewed Covid lockdowns in Europe causing demand fears (cited as the main reason for crude's volatile trading this week), many analysts say the dramatic price declines were in large part "due to this mechanical selling and portfolio re-balancing," according to Ryan Fitzmaurice, commodities strategist at Rabobank.

For the main, the consensus holds that much like the increase in Covid rates in Europe, the losses are just a temporary blip in an overall demand recovery trajectory: "The whole recovery trade got a little bit ahead of itself and oil got a little bit ahead of itself," said Jay Hatfield, CEO at InfraCap, adding that "once we get the real demand coming back, we can start to see prices heading to $70, $80 or even a superspike."

Rounding out Friday's news on crude, Yemen's Houthis said they attacked several of Saudi Aramco's facilities with drones and ballistic missiles, the latest in a spate of such attacks, and Saudi Arabia's defense ministry responded by telling media it plans to take deterrent actions to protect its export facilities.