Oil futures rose Wednesday, partially recovering from a rout in the previous session after a container ship ran aground in the Suez Canal, blocking traffic through the crucial waterway.
“About 10% of global seaborne oil passes through the canal. This should be fixed pretty quickly though so I doubt if it will have much lasting impact,” said Marshall Gittler, head of investment research at BDSwiss Holding, in a note.
West Texas Intermediate crude for May delivery rose $1.21, or 2.1%, to $58.97 a barrel on the New York Mercantiel Exchange. May Brent crude, the global benchmark, rose $1.16, or 1.9%, to $61.95 a barrel on ICE Futures Europe.
The bounce comes after sharp losses on Tuesday amid worries over rising European COVID cases and extended lockdowns on the continent stoked worries over the demand outlook. Crude fell into correction territory Tuesday, defined as a fall of 10% from a recent peak.
Traffic in the Suez Canal, a narrow waterway that divides continental Africa from the Sinai Peninsula, came to a halt Tuesday after the MV Ever Given, a Panama-flagged conatiner ship with an owner listed in Japan, ran aground.
The transport-related bounce aside, analysts said recent weakness in oil futures appeared to catch up with softness in the physical market.
Brent crude had moved into contango, in which nearby futures traded at a discount to later-dated contracts, a signal of weak demand and in incentive to put crude in storage.
At the same time, “speculative liquidation would have likely exaggerated the weakness in the flat price and spreads, much like speculative buying previously did with the move higher in the market,” said Warren Patterson, head of commodities strategy at ING, in a note.
“Speculators have held a sizeable long in oil, but with demand concerns resurfacing, speculators have become increasingly nervous. Weakness in the forward curve also makes oil less attractive for speculators, with a lower roll yield on offer, and in fact a negative yield now in the prompt spread,” he wrote.
U.S. inventories will also be in focus on Wednesday.
The American Petroleum Institute reported late Tuesday that U.S. crude supplies rose by 2.9 million barrels for the week ended March 19, according to sources. The data also reportedly showed gasoline stockpiles down by 3.7 million barrels, while distillate inventories rose by 246,000 barrels. Crude stocks at the Cushing, Okla., storage hub, meanwhile, were down 2.3 million barrels for the week, sources said.
More closely followed inventory data from the Energy Information Administration will be released Wednesday. On average, the EIA is expected to show crude inventories down by 1.7 million barrels, according to a survey of analysts conducted by S&P Global Platts. The survey also shows expectations for inventory gains of 900,000 barrels for gasoline and 200,000 barrels for distillates.