Sagging oil price surges 6pc as grounded ship blocks Suez Canal

NEW YORK: Oil prices jumped about 6pc on Wednesday after a ship ran aground in the Suez Canal, and worries that the incident could tie up crude shipments gave prices a boost after a slide over the last week.

The crude benchmarks, U.S. crude and London-based Brent, added to gains after U.S. inventory figures showed a further rebound in refining activity, suggesting U.S. refiners are mostly recovered from the cold snap that slammed Texas in February.

Brent crude gained $3.69, or 6.1pc, to $64.48 a barrel by 12:53 p.m. EDT (1653 GMT), after tumbling 5.9pc the previous day.

West Texas Intermediate (WTI) climbed $3.49, or 6pc, to $61.25, having lost 6.2pc on Tuesday.

The gains appeared to stabilize the market that had slumped from early this month, when prices hit their highest levels this year on expectations for demand recovery.

Those hopes have since been dashed as European nation’s re-entered lockdowns to halt another wave of the pandemic.

Oil has recovered from historic lows reached last year as OPEC and its allies made record output cuts.

On Tuesday, both benchmarks touched their lowest since February.

A giant container ship has been blocking the Suez Canal for more than a day, but it has been partially refloated, with traffic along the fastest shipping route from Europe to Asia expected to resume soon, port agent GAC said on Wednesday.

"It's one of those wild cards that is unique to the crude oil industry," said Bob Yawger of Mizuho in New York. "Once you think you have everything nailed down, I can guarantee one thing: you don't."

Oil prices were also supported by U.S. Energy Information Administration data that showed refinery runs recovering after a winter storm shut Texas refineries last month.

"The refiners are coming out of maintenance and recovering from the power outages. The expectation is now that they're getting back to work, we will see crude inventories trending lower in the coming weeks," said Phil Flynn, senior analyst at Price Futures Group in Chicago.

Italy, France and other European countries have re-imposed movement restrictions. But German Chancellor Angela Merkel said she was reversing a decision for a stricter Easter shutdown. Germany is Europe's biggest oil consumer.

OPEC and its allies, known as OPEC+, meet on April 1 to consider whether to unwind more of their output cuts.