Oil rises after Suez Canal blockage, strong European data

Crude was bolstered by positive economic data as Europe posted a record increase in factory output

Oil rebounded, following a sell-off on Tuesday, as investors assessed the impact of a blockage in the Suez Canal and European manufacturing data beat expectations.

Futures in New York added as much as 3.4% after a ship ran aground, giving the market a reprieve after prices sank to the lowest level since early February. Despite efforts to move the vessel, it could block the route for days, according to people familiar with the situation.

Crude was also bolstered by positive economic data as Europe posted a record increase in factory output. That masked fresh concerns across the region about surging coronavirus infections.

Oil prices have sunk about 12% in less than two weeks amid softening physical demand and the unwinding of long positions. The prompt timespread for Brent crude has also flipped into a bearish structure for the first time since January. Oil’s recent plunge may put pressure on OPEC+ to do more to try and stem the slide, with the group meeting next week to decide on production policy for May.

“It’s all about the Suez, as well as people trying to get into oil again after the sell-off,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “The situation is still murky in terms of lockdowns, mutations and vaccination rollout delays.”

The Suez Canal is frequently used by tankers transporting crude from the world’s top exporters in the Middle East to customers across Europe. The 400-meter (1,300-foot) long container ship Ever Given’s hull became wedged lengthways across the canal on Tuesday, causing a gridlock of at least 100 vessels.