Oil falls as demand concerns trump Suez Canal disruptions

Oil prices fell more than 1% as fresh coronavirus lockdowns revived worries about demand for oil products, even as tug boats struggled to move a stranded container ship blocking crude oil carriers in the Suez Canal. Brent crude futures slid 87 cents, or 1.4%, to $63.54 a barrel at 0405 GMT, after jumping 6% overnight.

U.S. West Texas Intermediate (WTI) crude futures dropped by $1.02, or 1.7%, to $60.16 a barrel, after climbing 5.9% overnight. Prices, which tumbled earlier in the week on worries about tighter pandemic curbs in Europe and vaccine delays stalling fuel demand growth, sharply reversed on Wednesday on news of the grounding in the Suez Canal, potentially blocking 10 tankers carrying 13 million barrels of oil.

Dozens of ships were in the five waiting zones for passage through the nearly 200 km (120 mile) canal, with more approaching the area. “The longer this disruption lasts the more likely we see refiners (and) buyers having to turn to the spot market to ensure supply from elsewhere,” ING Economics said, adding that shipping companies faced a decision on whether to travel via the Cape of Good Hope in South Africa, causing delays.

The market was also helped on Wednesday by data showing U.S. gasoline demand improved and refinery run rates were picking up. However, analysts said such supportive factors were likely to be overshadowed by growing concerns about global demand.

Oil falls as demand concerns trump Suez Canal disruptions, Reuters, Mar 25