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Blocking Of The Suez Canal Affects Oil Market

Blocking Of The Suez Canal Affects Oil Market 26.03.2021

Blocking Of The Suez Canal Affects Oil Market

On March, 23, container ship Ever Given ran aground after entering the Suez Canal from the Red Sea. During the movement in the north direction, there was a complete power outage on it. According to other sources, the cause was a strong wind and a powerful sandstorm. Navigation along the canal was suspended until the container ship was refloated. On the morning of March, 29, the media reported that rescue teams had floated the container ship Ever Given in the Suez Canal. However, it is not yet clear when traffic on the Suez Canal will be open to the congregated more than 450 ships.

The experts predict that even with a prolonged closure of the channel, oil prices are unlikely to increase significantly, since there are alternative transportation routes bypassing the Suez Canal, and significant volumes of oil have been accumulated in storage during the pandemic which are still much higher than normal levels.

Although the Suez Canal is an important logistic point for supplies, there are many alternative routes, and stocks in the world remain at a high level which will help to avoid a strong negative effect on buyers.

The blocking of the Suez Canal will mainly disrupt the flow of light oil to the East, while the bulk of the sulphurous oil will enter Europe through the SUMED pipeline, with a capacity of 2.5 million barrels per day. The canal supplied shipments of oil for China and South Korea, and China also imported Libyan oil in this direction. In the meantime, the situation will be smoothed out by the abundant stocks.

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