Oil prices are moving higher on news that a ‘mega ship’ is still grounded in the Suez Canal in Egypt, causing a traffic jam in both directions.
The ultra large container ship is stuck sideways, toward the south end of the canal. Tugs are still trying to dislodge the ship. Meanwhile, no other ships can pass through this critical waterway.
The Suez Canal is one of the world’s busiest maritime trade routes for oil. A narrow waterway that divides continental Africa from the Sinai Peninsula, the canal accounts for an estimate 10% of global seaborne oil passes through this canal.
Traders are concerned about a temporary constriction in supply levels as a result of the log jam. West Texas Crude Intermediate crude for May delivery topped $60.00 a barrel on the New York Mercantile Exchange Wednesday. Meanwhile, Brent Crude for May delivery rose 4% to $63.23 on the news.
The price of oil has been under pressure recently, but news of the MV Ever Given hull getting stuck length-wise in the canal is causing prices to rise.
The affect on oil supplies as a result of the canal blockage is considered temporary. As such, the Brent crude market is in what traders call contango. Contango signifies that near term futures contracts are trading at a discount to later-dated contracts.