BAKU, Azerbaijan, March 27
By Leman Zeynalova – Trend:
The grounding of a container ship in the Suez Canal helped to prop up the prices of some commodities despite growing worries over the potential hit to demand in Europe from the slow vaccine rollout and lockdown extensions, Trend reports citing UK-based Capital Economics research and consulting company.
“The Suez blockage pushed up the price of natural gas, and it also put the brakes on the decline in oil prices seen earlier in the week. Ultimately though, while there may be a temporary boost to commodity prices as freight is disrupted and ships are forced to divert around Africa, we don’t foresee any long-lasting implications. Countries will source commodities from elsewhere or draw down stocks until the canal re-opens,” the company said in its latest report.
Next week, while eyes may remain on progress resolving the blockage in the Suez Canal, the main events will be the release of the March PMI data and the OPEC+ meeting, both scheduled for Thursday.
“We expect China’s manufacturing PMI to show that foreign demand boosted factory activity and the US data are likely to be strong too. Meanwhile, with oil prices having fallen back since the last OPEC+ meeting and the recovery in US oil output remaining sluggish, it seems likely that OPEC+ members will maintain their current low level of oil production for another month,” the company said.
Capital Economics notes that the prices of energy commodities were supported by the closure of the Suez Canal.
According to the EIA, 5-10 percent of global oil and LNG shipments pass through the canal, which suggests that its closure could severely constrain supply. Natural gas prices surged on the week, but oil prices fell as any supply concerns were offset by expectations of lower demand caused by the extension of virus-related restrictions in Europe.
“As the disruption to the canal should be temporary, we doubt it will have much of a lasting impact on prices. However, we still think that oil prices will rise later this year as an easing of lockdown measures in Europe and elsewhere leads to stronger demand. At the same time, we doubt that the rig count in the US will pick up anywhere near as sharply as is currently implied by oil prices (4), which underpins our view that any recovery in US oil production will be subdued.”
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