SULAIMANI (ESTA) — Oil prices fell more than 1% as fresh COVID-19 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 $1.21 to $63.20 a barrel at 0637, after jumping 6% overnight. U.S. West Texas Intermediate (WTI) crude futures dropped by $1.31 to $59.87 a barrel, after climbing 5.9% overnight.
Prices sharply reversed on Wednesday on news of the grounding in the Suez Canal, potentially blocking 10 tankers carrying 13 million barrels of oil, according to Reuters.
Dozens of ships were in the five waiting zones for passage through the nearly 200 kilometers (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 told Reuters, noting 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.
“As much as those factors were there, it doesn’t really erase the demand concerns questions that were asked earlier this week,” Reuters cited Commonwealth Bank commodities analyst Vivek Dhar as saying.
“And while the focus was on Europe, we also have rising COVID-19 cases in places like India and Brazil, developing economies which are really critical to the story for sustainable oil demand growth.”