Singapore—0300 GMT: Crude oil futures slid during the mid-morning trade in Asia on possibility of a rapid resumption in oil flows as a grounded container ship blocking the Suez Canal was partially refloated, while data showing a build in US crude and product inventories also weighed on the sentiment.
At 11:00 am Singapore time (0300 GMT), the ICE Brent May contract was down by 83 cents/b (1.29%) from the March 24 settle to $63.58/b, while the May NYMEX light sweet crude contract was down by 91 cents/b (1.49%) to $61.18/b.The prices were under pressure by reports that the Ever Given container ship, which had run aground in the southern end of the Suez Canal on March 23 and obstructed the oil supply chain in the process, has been partially refloated.
"According to information from the Suez Canal Authority, the grounded vessel has been partially refloated and is now alongside the Canal bank. Convoys and traffic are expected to resume as soon as vessel is towed to another position," said the GAC in its latest update, even as it refrained from providing an estimate of when shipping flows will resume.
The Ever Given has blocked shipping flows along the Suez Canal, a strategic route that facilitates almost 10% of total seaborne oil trade, according to data from the US Energy Information Administration. According to Platts cFlow software, already the blockage has affected ships carrying crudes such as Saudi Arabia's Arab Light and Arab Extra Light, Iraq's Basrah Light and UAE's Murban, Platts reported earlier.
The partial refloating of the Ever Given weakened a pillar of support for the oil market, which had shrugged off concerns over the progression of the coronavirus pandemic in Europe and rallied close to 6% on March 24 on expectations of long delays in the resumption in shipping flows at the Suez Canal.
"Oil prices had rallied on strong PMI data from the US and Europe, and because of concerns over a prolonged disruption in global oil supplies due to the blockage at the Suez Canal. Those concerns are starting to ease as the Ever Given has been partially refloated, and we may see oil give up most of its overnight gains today," Jeffrey Halley, senior market analyst at OANDA, told Platts on March 25.
The fall in prices this morning also comes on the back of a bearish data release by the EIA showing a 1.91 million-barrel increase in crude stockpiles during the week ended March 19. US crude stockpiles are now at 502.71 million barrels, 6.4% above the five-year average for this time of year.
The crude inventory build came as a surprise to market analysts, who had expected a 1.7 million barrel draw in crude inventories on account of a normalization in refinery runs following the mid-February freeze, according to a survey conducted by S&P Global Platts.
In the same period, US gasoline stocks also rose by 200,000 barrels to 232.28 million barrels amid strong import activity, with distillate stocks also climbing 3.81 million barrels to 141.55 million barrels.
Sentiment took a further hit when the EIA data showed that total implied refined product demand was down around 1.2% on the week at 18.7 million b/d in the week ended March 19, as a 440,000 b/d fall in distillate demand overshadowed a 170,000 b/d rise in gasoline demand.
