WASHINGTON (DTN) -- Reversing overnight losses, oil futures nearest delivery on the New York Mercantile Exchange and Brent on the Intercontinental Exchange firmed in early morning trade Monday, following the breaking news that a 224-tonne container ship, Ever Given, grounded in the Suez Canal for nearly a week was partially re-floated, raising hopes that the critical passage for global oil and petroleum products trade could soon reopen.
The Suez Canal Authority said Monday that around 80% of the refloating process had been completed on the Ever Given, making way for a backlog of some 370 tankers and container ships. Despite the reported breakthrough, the ripple-effects on the global supply chain expected to last for weeks if not months, according to the shipping company Maersk. The Canal, that accounts for 10% of global oil trade, has remained closed for six days straight, prompting at least one country, Syria, announce fuel rationing as a result of the blockade. A prolonged closure will also push shipping and fuel prices higher in coming days as congested ports in Europe, Asia and the United States will further struggle to offload the backed-up cargoes. Global supply chains, already strained by the pandemic, expected to be further rattled by this "Black Swan" maritime accident, affecting oil loadings along with fuel demand.
With crisis in Suez Canal nearing its end, investors' focus will shift to the upcoming meeting among Organization of the Petroleum Exporting Countries and the Russia-led partners, scheduled for Wednesday and Thursday (3/31-4/1) this week. Markets expect the 23-nation alliance to extend the ongoing 7.05 million barrels per day (bpd) production cuts into another month joined with a 1-million bpd voluntary curb from Saudi Arabia as global demand continued to disappoint to the downside amid renewed lockdown orders in European Union. Furthermore, OPEC+ surely will consider the fact that U.S. crude inventories continued on the building pattern for the fifth straight week through March 19, rising over 40 million barrels (bbl) since the winter Storm Uri disrupted refinery operations along the U.S Gulf Coast.
On the hand, U.S. crude-oil production rebounded remarkably after February's disruption, bouncing back to 11 million bpd from the monthly low of 9.7 million bpd. This, in turn, might make countries like Russia reluctant to maintain deeper production cuts, prompting the defensive posture on getting more out of this week's meeting. 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."
Near 7.30 a.m. ET, West Texas Intermediate May contract advanced 42 cents to trade at $61.38 bbl and Brent May contract on ICE climbed 51 cents to above $65 bbl. NYMEX April ULSD futures added 1.04 cent to $1.8204 gallon and the front-month RBOB contact rallied 2.69 cents to start a new trading week near $1.9942 gallon.
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