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Futures Movers: Oil prices under renewed pressure on fears rising COVID cases will dent demand

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Crude-oil futures were under renewed pressure Thursday as worries over rising COVID-19 cases in major oil-consuming countries outside the U.S. underlined worries over the energy demand outlook.

Traders kept an eye on the progress of moving a ship that blocks the Suez Canal, which has led to a halt in shipping through one of the world’s key waterways, leading to disruptions in the transport of oil. Bloomberg reports that the best chance to move the massive container ship may come at peak tide on Sunday or Monday.

Read: Why the blockage of the Suez Canal matters for oil prices

While some estimates suggest tankers carrying up to 15 million barrels of crude are currently impacted by the Suez situation, reports have suggested the 1,300 foot ship, the Ever Given, could potentially be moved by Monday, said Robbie Fraser, manager of global research & analytics at Schneider Electric.

“That timeline would offer little in the way of long-term market impact,” he said, in a market update. “A more significant risk comes from the potential for timelines to be hit with significant delays as efforts continue into the weekend.”

West Texas Intermediate crude for May delivery
CL.1,
-4.89%

CLK21,
-4.89%

fell $2.57, or 4.2%, at $58.61 a barrel on the New York Mercantile Exchange. Prices looked to give up most of the 5.9% rise seen on Wednesday and traded down over 4% week to date.

May Brent crude
BRN00,
-4.30%

BRNK21,
-4.32%
,
the global benchmark, dropped $2.24, or 3.5%, to $62.17 a barrel on ICE Futures Europe, following a 6% rise a day earlier.

“Europe tightening lockdown restrictions has unnerved the markets, but COVID cases are also rising sharply in key developing economies such as India and Brazil, whose oil consumption is also a key factor in supporting prices,” said Sophie Griffiths, market analyst at Oanda, in a note. “In a short period, the outlook for global recovery has deteriorated, raising questions over future demand.”

India reported 47, 262 cases and 275 deaths on Wednesday, marking its biggest daily rise this year, the BBC reported. Brazil has seen a spike in infections, while total deaths in the country from COVID-19 exceeded the 300,000 threshold, making it the second country to do so, according to the Associated Press.

Coronavirus tally: Global cases of COVID-19 top 124.8 million and U.S. tops 30 million cases

The fall in prices Thursday comes after a volatile two-day trading period that saw crude tumble by around 6% on Tuesday and bounce by around 6% on Wednesday. The bounce in Wednesday’s session came as traders reacted to the blockage of the Suez Canal by a container ship that ran aground. The canal, which divides continental Africa from the Sinai Peninsula, connects the Red Sea with the Mediterranean Sea. An estimated 10% of total seaborne oil trade passes through the waterway.

Despite efforts to dislodge the container ship, it remained stuck on Thursday, with at least 150 other vessels waiting to pass through the canal idled, according to authorities.

News of the halt in shipping traffic through the canal took the spotlight away from weekly U.S. petroleum supply data released Wednesday. The Energy Information Administration reported a 1.9 million-barrel rise in domestic crude inventories for the week ended March 19 — a fifth weekly increase in a row. Gasoline supply also edged up by 200,000 barrels and distillates added 3.8 million barrels, the EIA said.

On Nymex Thursday, April gasoline
RBJ21,
-3.37%

traded at $1.92 a gallon, down 3.3%, while April heating oil
HOJ21,
-4.23%

lost 3.9% to $1.76 a gallon.

April natural gas
NGJ21,
+2.14%

tacked on 2.1% to $2.57 per million British thermal units. Prices turned higher on the back of a larger-than-expected weekly decline in U.S. supplies of the fuel.

The U.S. Energy Information Administration reported on Thursday that domestic supplies of natural gas fell by 36 billion cubic feet for the week ended March 19. That compares with a decline of 44 billion cubic feet forecast by IHS Markit.

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