© Reuters. FILE PHOTO: Container ship runs aground in Suez Canal blocking traffic
By Sonali Paul and Aaron Sheldrick
MELBOURNE (Reuters) – Oil prices fell more than 1% as the new coronavirus lockdown revived concerns over demand for oil products, even as tugs struggled to move a stranded container ship that was blocking carriers in the Suez Canal.
Futures were down 87 cents, or 1.4%, to $ 63.54 a barrel at 0405 GMT after rising 6% overnight.
US West Texas Intermediate (WTI) crude oil futures fell $ 1.02, or 1.7%, to $ 60.16 a barrel after rising 5.9% overnight.
Prices, which fell earlier this week on worries over tighter pandemic restrictions in Europe and delays in vaccines holding back growth in fuel demand, reversed sharply on Wednesday on news of the Suez Canal landing, potentially blocking 10 tankers at 13 million Barrel of oil.
Dozens of ships were in the five waiting areas to cross the nearly 200 km long canal, with more approaching the area.
“The longer this disruption lasts, the more likely it is that refiners (and) buyers will have to turn to the spot market to ensure supplies from elsewhere,” ING Economics said, adding that shipping lines were faced with a decision about that Cape of Good hope to travel in South Africa, which leads to delays.
The market was also supported on Wednesday by data showing US gasoline demand improved and refinery run rates increased.
However, analysts said such supportive factors are likely to be overshadowed by growing concerns about global demand.
“As much as these factors were there, it doesn’t really remove the demand for questions asked earlier this week,” said Vivek Dhar, Commonwealth Bank commodities analyst.
“And while the focus has been on Europe, we also have rising COVID-19 cases in countries like India and Brazil that are developing economies that are really crucial to the history of sustainable oil demand growth.”
India reported its highest one-day number of new infections and deaths on Wednesday, saying a new “double mutant” variant of the coronavirus had been found.
With ongoing demand concerns and falling prices, expectations are rising that the organization of petroleum exporting countries and allies, collectively called OPEC +, will extend its current supply restrictions through May at a meeting scheduled for April 1, four OPEC + sources told Reuters .
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