Oil prices reversed a sharp sell-off a day earlier to rise 1% on Friday on mounting fears that it could take weeks to dislodge a giant container ship blocking the Suez Canal, which would squeeze supplies of crude and refined products.
Both benchmarks were on track for a weekly loss of about 3%, following a more than 6% decline last week.
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 might take weeks to free.
“Fears of supply tightness grew as the key Suez Canal remained blocked by the giant ship, outweighing concerns over weak demand due to lockdowns in Europe and Asia,” Satoru Yoshida, Commodity Analyst ,Rakuten Securities.
OPEC+ Oil Production Expectations
Additionally, expectations that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, will likely maintain their lower production also supported prices.
OPEC+ is scheduled to meet on April 1 to decide on May supplies; they are also expected to stick to current lower levels broadly, as the outlook for demand has deteriorated due to new lockdowns in Europe.
Acting a week ahead of the OPEC+ meeting, Abu Dhabi National Oil Company (ADNOC) has deepened crude oil supply cuts to Asian customers in June to 10%-15% from 5%-15% in May, several sources with knowledge of the matter said on Thursday.
Countries in Europe are renewing restrictions to curb the 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.
In parts of western India, authorities ordered people indoors as new infections hit the highest level in five months.