Crude oil prices rallied by about 2% on Friday morning over mounting fears that it could take weeks to evacuate a stranded giant container ship blocking the Suez Canal.
Data retrieved from Lloyd’s List, a shipping data and news company revealed that the stranded mega-container ship is holding up an estimated $400 million an hour in trade, based on the estimated value of goods that are moved through the Suez Canal daily.
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That being said, the black liquid hydrocarbon still heads for a third consecutive weekly decline on growing concerns of the third wave of the COVID-19 crisis.
- At the time of writing this report, Brent crude rallied by 1.8%, to trade at $63.04 a barrel after losing about 4% on Thursday.
- The major oil benchmark is on track for a moderate weekly loss, following a more than 6% drop in the past week.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics highlighted key macros that could weigh on oil prices in the midterm:
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“The Suez Canal blockage’s transitory nature gave way to general nervousness around rising COVID -19 cases in Europe, India, and Brazil.
“And with an enduring safe- haven bid under the US dollar continuing to pressure oil prices, eventually, the trap door sprung and triggered a ferocious sell-off.
“And while sentiment was thrown an economic lifeline in the form of quickly repairing US job markets, it did provide a soft bed, but the bearish sentiment seemed to be winning out as the bounce was unconvincing.”
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What to expect: Oil pundits anticipate that the reimposition of lockdowns in Europe would weigh more on oil prices as the resurgence of COVID-19 in hotspots worldwide does little to improve the prospect of regional travel and leisure sectors.