The debacle in the Suez Canal dominated commodity markets last week and will do so this week as oil prices kicked higher again on Friday, copper and gold rose, as did iron ore.
There are more than 200 vessels of all types – including 30 oil tankers – are waiting to traverse the Suez Canal, which has been blocked since Wednesday after a container ship ran aground.
Shipping companies have re-routed other vessels and some of the waiting vessels are reported to be moving to sail out into the Atlantic and turn left.
It may take weeks to free the beached vessel, though analysts said usual seasonal low demand period for oil may ease the impact delays on energy prices.
The stranded container vessel was loaded with goods from China and bound for Rotterdam.
The impact though of the stranding on crude oil movements has been overblown.
In fact most crude from the Middle East for Europe or the US is carried in tankers too big for the Suez Canal – so called VLCC and ULCC (Very Large or Ultra Large Crude Carriers). The largest oil carriers for the Canal are so-called SuezMax carriers.
They have a maximum size of 120,000 to 180,000 deadweight tonnes (dwt) and carry less than 800,000 to just over a million barrels of crude. Very Large Crude Carriers range from 200,000 to 320,000 dwt and carry around 2 million barrels of crude. Some smaller ULCCs can navigate the Suez Canal after its most recent expansion.
Ultras are above 320,000 tonnes DWT (but are not as popular as the VLCCs). Only a dozen or so are left. Only 2 are actually in operation as they are too costly and too difficult to run economically and very few ports can accommodate them outside China.
Tankers carry around 60% of the world’s 96 million barrels of crude consumed each day (down from 101 million barrels a day in 2019). That’s less than 2 billion tonnes of crude a year. Tankers that can use the Suez Canal (like the Panama Canal) are size limited and can’t take the giant tankers that carry much of the crude from the Middle east to Europe and Asia and to the US (from Saudi Arabia).
The Suez blockage saw US West Texas Intermediate crude rise 4.1% to $US60.97 a barrel on Friday while Brent crude in Europe was up 4.04% a barrel to $US64.43.
But for the week WTI fell 1.1% and Brent eased 0.4%.
Meanwhile American energy firms added oil and natural gas rigs last week, with the total count rising for an eighth month and a second quarter in a row as higher oil prices boost activity across US fields.
The oil and gas rig count rose six to 417 in the week to March 26, its highest since April last year, energy services, Baker Hughes Co said on Friday.
That is up 71% from a record low of 244 in August 2020, according to Baker Hughes but the count is still 311 rigs, or 43%, below this time last year.
In March, the total rig count was up for an eighth month in a row for the first time since July 2017, rising by 15.
US oil rigs rose six to 324 last week, their highest since May, while gas rigs were unchanged at 92 for a fifth week in a row. The oil rig count has risen for a seventh month in a row and a second consecutive quarter.
US crude futures are up about 26% so far this year after last week’s fall was the third weekly dip in a row.
Meanwhile Comex gold futures ended up on the day on Friday but down slightly on the week.
Gold rose 0.4% to $US1,732.30 on Friday, but shed 0.5% for the week for the first negative week in the last three.
Comex silver fell 4.1% over the week to end around $US25.11 an ounce.
Comex copper settled at just over $US4.06 a pound and then rose in after hours trading to close at $US4.07 a pound, up 2.5% on the day but down 0.6% for the week.
And iron ore prices finished higher on Friday.
The price of 62% Fe fines delivered to northern China ended at $US161.30 a tonne, up $US1.45 while the price of 65% Fe fines ended at $US190.80 a tonne for a gain of just 40 cents on the day.
For the week 62% Fe fines fell $US5.20 a tonne over the week, or just over 3%. The price of 65% Fe fines dropped just $1.70 a tonne or less than 1%.
The smaller fall for 65% Fe fines again tells us that Chinese buyers continue to favour the higher-grade fines for the better steel yields.
