Oil prices rose more than 4% on Friday, rebounding on concerns it could take weeks to dislodge a giant container ship blocking the Suez Canal, which would squeeze supplies of crude and refined products.
Prices, however, were still headed for a third consecutive weekly loss, with the outlook for demand dented by fresh coronavirus lockdowns in Europe.
Brent crude rose $2.37, or 3.8%, to $64.32 a barrel at 10:57 a.m. EDT (1457 GMT), after dropping 3.8% on Thursday.
US West Texas Intermediate (WTI) crude rose $2.38, or 4.1%, to $60.94 a barrel, having tumbled 4.3% a day earlier.
Brent was on track to end the week down 0.2%, and WTI down 0.6%, their third weekly loss.
Oil trade was volatile this week, as traders assessed how long the Suez Canal blockage which happened on Tuesday will last, while also determining the effect new coronavirus lockdowns in Europe will have on demand.
“Today the market is up again as traders in a change of heart decided that the Suez Canal blockade is actually becoming more significant for oil flows and supply deliveries than they previously concluded,” said Paola Rodriguez Masiu, Rystad Energy’s vice president of oil markets.
Egypt’s Suez Canal Authority said on Friday operations to free the stranded container ship would resume after completing dredging operations, which are 87% complete.
The salvage company said on Thursday that dislodging the ship could take weeks.
Of the 39.2 million barrels per day (bpd) of total seaborne crude in 2020, 1.74 million bpd went through the Suez Canal, according to data intelligence firm Kpler. Additionally, 1.54 million bpd of refined oil products flow through the canal, about 9% of global seaborne oil product trade, Kpler said.
On Friday, there were ten vessels waiting at the entry points of the Canal carrying around 10 million barrels of oil, Kpler said.
Reeling from the blockage in the Suez Canal, shipping rates for oil product tankers have nearly doubled this week, and several vessels were diverted.
The oil markets were also lifted by worries over escalating geopolitical risk in the Middle East. Yemen’s Houthi forces on Friday said they launched attacks on facilities owned by Saudi Aramco.
Expectations that the Organization of the Petroleum Exporting Countries and its allies will likely maintain their lower production also supported prices.
Big oil importer India said Saudi Arabia telling it to tap its oil stockpiles to tackle high prices was “undiplomatic.”
Acting a week ahead of the OPEC+ meeting, Abu Dhabi National Oil Company (ADNOC) has deepened crude oil supply cuts to Asian customers in June to 10%-15% from 5%-15% in May, several sources said.
Still, the potential negative effect on demand from the coronavirus pandemic loomed. Germany’s third wave of the coronavirus could turn into the worst one so far and 100,000 new daily infections is not out of the question, the head of the German Robert Koch Institute (RKI) said on Friday.