Crude oil prices moved sharply higher on Friday to pare back most of weekly losses as investors continue to closely monitor developments in the Suez canal.Fundamental analysis: Can Suez blockage seriously disrupt crude oil market?
One of the largest container ships in the world Ever Given got stranded in Suez Canal and blocked an essential trade passage and analysts believe the blockage could significantly impact crude and tanker rates. The blockage saga is already weighing on certain countries more, like India.
“If the issue is not solved today it will start to have implications on the bigger trade flow and shipping sectors. If it is not solved by the coming spring tide (27/28 March) it will begin to affect refining operations on a broader scale,” data firm Vortexa shows.
However, the import and export of ethane from the United States and the import of crude from Latin America could have the worst impact on India.
India imports roughly 500,000 barrels per day of crude products through the Suez Canal, more than China, which imports more than 400,000 barrels per day, and more than South Korea and Singapore, which import somewhat below 400,000 barrels per day, Vortexa data shows.
The data also showed that India imported a record 5 million barrels of crude oil per day in December 2020. According to analysts, the longer the Ever Given stays stranded the larger will the impact on oil trade and crude prices be.Technical analysis: Volatile trading
Crude oil prices gained over 4% on Friday to pare back the majority of weekly losses. The price action has been trading up and down for most of the month of March, with the monthly tally currently standing at negative 1.2%.Crude oil daily chart (TradingView)
The price action is still trading below both the 100-MMA and 200-MMA, with both of these levels still acting as resistance zones. On the downside, any move to the $55 area is likely to be seen as a buying opportunity for traders looking to invest in commodities amid the accelerated economic recovery in the United States.Summary
The recent stranding of the container ship Ever Given in the Suez Canal could significantly disrupt the oil trade and crude prices. Crude oil prices gained over 4% to close above the $60 mark despite dipping to low $57s earlier in the week.