WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Thursday's session sharply lower, giving up most of Wednesday's gains. The move was propelled by the transit disruption in the Suez Canal, one of the world's busiest waterways, where a grounded container vessel created bottlenecks that could slow the delivery of more than 13 million barrels (bbl) of crude and petroleum products to European and U.S. refineries.
Shrugging off the risk, oil traders appear to have shifted focus back to concerns over slowing demand and the next move on production cuts by OPEC+ when the group meets April 1. The consensus calls for the 23-nation alliance to extend 7.050 million barrel-per-day (bpd) curbs for another month amid renewed lockdowns in the European Union and a growing number of COVID-19 infections in some developing countries. On March 4, the alliance agreed to maintain most of their cuts in April, with Saudi Arabia extending its voluntary 1 million bpd output cut until April 30. Russia and Kazakhstan were granted exceptions and could increase production by 130,000 bpd and 20,000 bpd, respectively, "due to continued seasonal consumption patterns."
The shipping accident in the Suez Canal has taken a backseat on Thursday despite indications transit through the channel is unlikely to resume until early next week. It remains unclear how long it will take the Suez Canal Authority to refloat the vessel, but what is certain is that at least thirty ships, some of them oil tankers, are currently waiting to transit through 119-mile-long canal. Vortexa estimates over a dozen tankers, carting some 13 million bbl of crude oil, have been affected by the blockade. On Wednesday, Chairman and Managing Director of the Suez Canal Authority Admiral Osama Rabie announced navigation though the Suez Canal is "temporarily suspended until the flotation works of the large Panamanian container vessel is complete."
Thursday's lower settlements came despite better-than-expected economic data in the United States, showing weekly unemployment claims falling to the lowest level since the beginning of the pandemic at 684,000, reflecting the economy's ongoing recovery. Large states of Illinois, California and Florida led the decline in nationwide unemployment last week amid easing mobility and business restrictions.
Federal Reserve Chairman Jerome Powell hinted Thursday the central bank would begin pulling back its support for the U.S. economy once its goals on inflation and employment have been met.
"Over time, we will, as the economy recovers, gradually roll back the amount of Treasury and mortgage-backed securities we're buying," Powell told NPR's Morning Edition. "And then in the longer run, we've set out a test that will enable us to raise interest rates. So, we will very, very gradually over time and with great transparency be pulling back the support that we provided during emergency times."
On the session, West Texas Intermediate May contract declined $2.62 or 4.5% to settle at $58.56 bbl and Brent May contract on ICE dropped $2.46 to below $62 bbl at $61.95 bbl. NYMEX April ULSD futures slumped 7.78 cents to $1.7478 gallon and front-month RBOB contact declined 6.81 cents or 3.7% to $1.9209 gallon.
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