Oil Prices Jump 5% as Ship Blockage Disrupts Crude Flows
By Adedapo Adesanya
Oil prices surged more than 5 per cent on Wednesday as investors assessed the impact on global crude flows after a large ship ran aground and blocked the Suez Canal, threatening supply.
Yesterday, the price of the Brent crude futures moved up by $3.33 or 5.49 per cent to trade at $64.13 per barrel, while the West Texas Intermediate (WTI) crude futures went up by 5.35 per cent or $3.10 to $60.85 per barrel.
From the day’s outcome, it is certain that the disruption in crude flows caused by the Suez Canal blockade in Egypt is pushing the value of the commodity higher.
The pathway is frequently used by tankers transporting crude from the world’s top exporters in the Middle East to customers across Europe and the United States, and also by ships moving cargoes from the North Sea to Asia.
The 400-meter long container ship called Ever Given was tipped by strong winds and it went length-ways across the canal on Tuesday, causing a gridlock of at least 100 vessels.
As many as 10 crude tankers carrying around 13 million barrels of oil could be affected by the disrupted traffic in the canal.
Prices also gained on Wednesday even as the crude oil inventories went up by 1.9 million barrels in the week to March 19, according to a report by the Energy Information Administration (EIA).
The agency added that at 502.7 million barrels, inventories were 6 per cent above the five-year average for this time of year.
The figure compares with a build of 13.8 million barrels reported for the previous week. Analysts had expected the EIA to report an inventory decline of some 900,000 barrels.
A day earlier, the American Petroleum Institute (API) reported a crude oil inventory build of 2.927 million barrels for last week.
Oil prices had declined by more than 10 per cent this week as Europe battles yet another rise in COVID-19 infections and several EU states have started tightening movement restrictions soon after they relaxed them in anticipation of a steady decline in infections.
Coronavirus infections have been surging in some parts of Europe in recent weeks as countries scramble to vaccinate their populations despite delays in rolling out jabs.