Oil Price Fundamental Daily Forecast – Suez Canal Blockage Offsets COVID-19 Lockdown Concerns

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures jumped over 4% on Friday on concerns global supplies of crude and refined products could be disrupted for weeks as workers try to dislodge a giant container ship from blocking the Suez Canal. The market made an about face from a steep break the previous session on concerns that renewed coronavirus lockdowns in Europe would slow the demand recovery.

On Friday, May WTI crude oil futures settled at $60.97, up $2.41 or +4.12% and Brent crude oil finished at $64.43, up $2.63 or +4.08%.

Since Tuesday, traders have been weighing the potential impact of the Suez Canal blockage against the effect of new coronavirus lockdowns. This helped produce a volatile, two-sided trade. However, Friday’s price action suggests traders now feel the event has become more significant for oil flows and supply deliveries, leading to the strong surge during the trading session.

Workers at the Suez Canal stepped up efforts on Friday to free the stuck mega vessel, after an earlier attempt failed. Some experts said efforts to free it may take weeks, with possible complications from unstable weather.

Meanwhile, reeling from the blockage in the Suez Canal, shipping rates for oil product tankers have nearly doubled this week, and several vessels were diverted.

China, Iran Expected to Sign 25-year Accord, Iranian State Media Says

Chinese Foreign Minister Wang Yi arrived in Iran on Friday for a visit that Iranian state media said would see the signing of a 25-year cooperation agreement between the two countries, which are both under U.S. sanctions.

Yemen’s Houthis Warn of Stronger Attacks after Drone Strikes on Saudi Arabia

Yemen’s Iran-aligned Houthis said on Friday they had attacked Saudi energy and military sites with 18 armed drones, and the kingdom’s energy ministry reported that a projectile had struck a petroleum products distribution station, causing a fire.

The Saudi energy minister said that at 9 p.m. on Thursday a projectile had struck a petroleum products distribution station in Jazan that caused a fire in a tank.

Houthi military spokesman Yahya Sarea said on Friday that the group had targeted facilities of state oil company Saudi Aramco in Ras al-Tanura, Rabigh, Yanbu and Jazan. He said they are targeted King Abdelaziz military base in Dammam and military sites Najran and Asir.

“We are prepared to carry out stronger and harsher military attacks in the coming period,” he said on Twitter.

Short-Term Outlook

The three events on Friday – the Suez Canal blockage, the China-Iran Accord and the Houthis Attack on Saudi Arabia are call demand issues. The Suez Canal blockage and Houthis Attack are potentially short-term bullish because of they could potentially stop supply from hitting the market. The China-Iran Accord is potentially long-term bearish because it will increase supply on the market.

Meanwhile, the wildcard remains the increasing coronavirus cases in Europe and Asia. Furthermore, we should know in about two-weeks if the same issue becomes a major concern in the United States. Rising COVID-19 cases could slow down the global demand recovery.