Crude Oil Prices Rebound amid Traffic Jam in Suez Canal, Supply Build

Crude oil futures are bouncing back from their descent into correction territory. Brent and US crude prices have rebounded on the buildup of traffic in the Suez Canal, while investors are also combing through the US government’s weekly supply report. Is the end of the pullback, or is there still some correction to unfold?

April West Texas Intermediate (WTI) crude future surged $1.97, or 3.41%, to $59.73 per barrel at 14:54 GMT on Wednesday on the New York Mercantile Exchange. Despite a wave of recent weakness, US crude prices have risen 24% year-to-date.

Brent, the international benchmark for oil prices, tested $63 in intraday trading. May Brent crude futures soared $2.08, or 3.42%, to $62.94 a barrel on London’s ICE Futures exchange. Brent is also up about 22% so far this year.

According to the US Energy Information Administration (EIA), domestic inventories of crude oil increased 1.912 million barrels in the week ending March 19. The market had anticipated a withdrawal of 272,000 barrels.

Stockpiles at the Cushing, Oklahoma storage facility declined 1.935 million barrels. Gasoline supplies rose 203,000 barrels, while distillate stocks climbed 3.806 million barrels.

Last week, the Baker Hughes oil rig count jumped to a three-month high of 318, marking the sixth consecutive week that the number of crude oil rigs was above 300.

Crude prices had been sliding over the last week on concerns over a growing number of European countries extending their lockdowns amid rising coronavirus infections. Investors fear that this will weigh heavily on energy demand. The slump was so bad that oil prices had fallen into correction territory, with a more than 10% plunge.

WTI and Brent futures bounced back midweek on problems in the Suez Canal. On Tuesday, traffic in the narrow waterway had stopped after the MV Ever Given, a Panama-flagged container ship with an owner listed in Japan, got stuck.

In other industry news, new data found that US refiners utilized Russian oil and petroleum products to fill the deficit left by sanctioned Venezuelan oil and a drop in shipments from the Organization of the Petroleum Exporting Countries (OPEC).

Moreover, a new Rystand Energy forecast suggests that 118,500 oil and gas wells will be drilled across the globe next year. Daniel Holmedal, an energy research analyst at Rystad Energy, wrote in the report:

In contrast to previous years, when the North American shale sector-led production growth, we expect the onshore and offshore shelf in the Middle East and the deepwater market in South America to be the main drivers of growth going forward. To recover production levels, operators will have to launch new drilling plans in tandem with maintenance and enhancement programs for existing wells, opening significant opportunities for well service suppliers in the years ahead.

In other energy commodities, April natural gas futures rose $0.03, or 1.17%, to $2.584 per million British thermal units (btu). April gasoline futures rallied $0.0446, or 2.35%, to $1.941 per gallon. April heating oil futures advanced $0.0397, or 2.27%, to $1.7899 a gallon.

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