On Thursday, March 25, international oil prices fluctuated sharply for the third day in a row, only this Time in a more acute direction, plunging downward and returning to the one-month lows seen since February 12.
U.S. stocks at midday, the U.S. oil WTI May futures contract fell as deep as $3.73 or 6.1% during the day to a daily low of $57.45, falling below 61, 60, 69, 68 four hurdles in a row during the day, basically completely retracted Wednesday’s closing gain of $3.42 or 5.9%.
International Brent May futures fell $3.42 or 5.3% to a daily low of $60.99, falling below the $64, $63, $62, $61 four integer levels in a row during the day, also mostly retracted Wednesday’s close of $3.62 or 6% of the trend.
And on Tuesday, U.S. oil WTI had closed down 6.2%, and cloth oil had closed down 5.9%. After three days of oscillation, WTI barely stood at $58 at midday on Thursday in the U.S., and Bumiputra regained $62, but both fell back solidly from 14-month highs in early March, not far from technical levels of consolidation.
Some analysts say today’s renewed plunge in oil prices is due to new Epidemic restrictions in Europe activating concerns about demand, outweighing the boosting effect on oil prices from Tuesday when the Suez Canal, an important sea transport route, was blocked by giant ships.
Egypt’s Suez Canal Authority announced a temporary suspension of vessel traffic in the canal from Thursday until the stranded giant Panamanian freighter EVER GIVEN completes its de-shallowing, according to the latest CCTV news report. At present, there are including Barak 1 tugboat and 8 giant tractor consisting of a total tensile strength of 160 tons of rescue forces involved in the towing of the cargo ship shallow work.
Meanwhile, two of the world’s largest container shipping companies, A.P. Moller-Maersk A/S and Hapag-Lloyd AG, said they are considering detouring their ships around Africa to avoid the Suez Canal blockage. The canal has been blocked by at least 100 vessels traveling to and from the canal since it became congested this Tuesday, March 23, when the ships ran aground.
Analyst Norbert Rücker of Julius Baer Bank noted that the Suez Canal blockage mainly caused “noise” in the market and would not have any lasting fundamental impact.
Ann-Louise Hittle, vice president of consulting firm Wood Mackenzie, also said that a few days’ delay in shipping Crude Oil or products through the Suez Canal to Europe and the United States would not have a long-term impact on prices in those markets.
IHS Markit energy market analyst Marshall Steeves said the Suez Canal blockage triggered a jump in oil Wednesday but the impact was short-lived because it is “not actually a major transportation route for crude oil.
James Williams, an energy economist at WTRG Economics, believes the volume of oil passing through the canal is close to 3 million barrels per day and that “with high crude inventories around the world, it doesn’t matter to the market if oil is delivered a few days late.”
Mainstream Wall Street analysts are saying that the essential effect of the Suez Canal blockage is to provide a short-term downward cushion for the weak crude oil market at this stage, as the issue is unlikely to change more important fundamentals, including a slower-than-expected economic recovery due to fears of an epidemic and the realization that OPEC+ could eventually deliver significant additional oil supplies to the market.
What’s more, the Suez Canal will be dredged sooner or later and will certainly not be closed forever, so it cannot be a strong support for oil prices. However, oil analyst firm Vortexa said any delays leading to the diversion would add 15 days to the Middle East to Europe voyage. Therefore, if the relief effort lasts for a few weeks, it may temporarily change the status quo of oil market supply and demand further.
Market researcher Kpler calculates that about 30 oil-carrying vessels are waiting to cross the Suez Canal or close to it, holding a total of 8.8 million barrels of crude oil, slightly less than 1/10th of the daily global consumption and worth about $550 million at current prices. There are also 15 ships carrying petroleum products such as jet fuel and gasoline, as well as five giant LNG carriers.
According to Alex Booth, head of research at Kpler, “There will be some short-term problems for refineries and consumers of the product.”
In addition to the Suez Canal dredging and European oil demand issues, the market is also focused on oil production decisions for the OPEC+ ministerial meeting on April 1. Jeffrey Halley, senior market analyst at OANDA, said that “the oil market is unlikely to resume positive upward momentum” before the meeting. Four sources said OPEC+ would leave its April production policy unchanged and extend it into May.
Finally, dollar-denominated commodities such as crude oil continue to come under pressure from a stronger dollar. The dollar index rose more than 0.2% intraday on Thursday to 92.793, a four-month high since last November.
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