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Oil Prices Drop as Suez Canal Ship is Refloated 6 Days Later

Oil was slightly lower on Monday, relatively placid after four sessions of wild swings in price, as efforts continued to dig out the giant container ship clogging the Suez Canal and little new emerged in the demand picture.

Brent oil was down 18 cents, or 0.3%, at $64.39 a barrel by 0141 GMT. U.S. crude fell 22 cents, or 0.4%, to $60.75 a barrel.

Both benchmarks are roughly where they were before the Ever Given became a household name after the container ship got stuck in a narrow portion of the Suez canal last week.

Brent Oil
Brent Crude Oil futures, one year price activity chart.

Hundreds of other container ships, bulk carriers and oil-laden tankers are backed up at both ends of the canal as salvage teams intensified excavation and dredging to refloat the 400-metre (440-yard) ship.

“Each day that passes increases the oil on water rather than in the refinery for processing,” said Stephen Innes, chief markets strategist at axi. That “should help to re-tighten the physical market and stabilize prices.”

Oil prices rose more than 4% on Friday, capping a week of wild swings as traders and investors tried to weigh the impact of the blockage of a key trade transit point and the broader effect of lockdowns to stop coronavirus infections.

Prices are getting some support from expectations that the Organization of the Petroleum Exporting Countries and its allies will maintain lower output levels when they meet this week.

OPEC+ Outlook on Oil

The all-important OPEC+ meeting scheduled in four days’ time. Energy experts anticipate OPEC+ focus will center on whether they stick to the status quo by extending the current output cuts; as such a change in tone could push Brent crude prices below $60 a barrel momentarily.

Current price actions further reveal Brent crude bears are dominating despite recent upsides as the $63.50 -$65 price area further hint Oil prices head returning to the correctional bearish track; however Brent crude bulls would hold bay at $60 support area as they await a clearer signal of supply disruptions and the outcome of OPEC+ meeting.

The Saudi led coalition had earlier maintained production cuts at higher prices in recent weeks thus look less likely to open the taps, as the third wave of COVID-19 pandemic rattle European markets and certain areas of Australia despite significant progress with COVID-19 vaccines roll out in many parts of the globe,