Commodity Market: US Crude Oil plummets over 2% as global demand concerns overshadow disruptions in the Suez Canal

Futures on US West Texas Intermediate Crude Oil retreated more than 2% on Thursday, since new pandemic-related lockdowns once again brought to life concerns over oil demand, even as a stranded container ship was still obstructing oil carriers in the Suez Canal.

“Oil is shifting lower, and in addition to lockdown woes, the slow uptake in Chinese buying, evidence of rising Iranian exports and clear signals that the physical market was not reflecting the futures market continues to cloud the near term viewfinder,” Stephen Innes, chief markets strategist at Axi, was quoted as saying by Reuters.

Oil prices sharply reversed earlier losses on Wednesday following reports of the grounding in the Suez Canal, which could potentially block 10 tankers with 13 million barrels of oil, while a number of ships were in the five waiting zones to pass through the 200 km canal.

“The longer this disruption lasts the more likely we see refiners (and) buyers having to turn to the spot market to ensure supply from elsewhere,” ING Economics said in a note to clients.

Additional support to oil prices came from an official government report that revealed gasoline demand in the United States had picked up and refinery run rates had improved.

However, there are analyst opinions that all supportive factors could be offset by rising concerns over global oil demand.

“As much as those factors were there, it doesn’t really erase the demand concerns questions that were asked earlier this week,” Commonwealth Bank commodities analyst Vivek Dhar said.

“And while the focus was on Europe, we also have rising COVID-19 cases in places like India and Brazil, developing economies which are really critical to the story for sustainable oil demand growth.”

As of 9:50 GMT on Thursday WTI Crude Oil Futures were retreating 2.26% to trade at $59.80 per barrel, while moving within a daily range of $59.65-$60.86 per barrel. WTI Crude Oil Futures have plunged 2.81% so far in March, following a 17.82% surge in February.

Brent Oil Futures were retreating 0.89% on the day to trade at $63.57 per barrel, while moving within a daily range of $63.02-$64.16 per barrel. Brent Oil Futures have dropped 1.40% so far in March, following a 17.09% surge in February.

Daily Pivot Levels (traditional method of calculation) – WTI Crude Oil Futures

Central Pivot – $59.94
R1 – $62.58
R2 – $63.99
R3 – $66.63
R4 – $69.28

S1 – $58.53
S2 – $55.89
S3 – $54.48
S4 – $53.08

Daily Pivot Levels (traditional method of calculation) – Brent Oil Futures

Central Pivot – $63.06
R1 – $65.62
R2 – $67.11
R3 – $69.67
R4 – $72.24

S1 – $61.57
S2 – $59.01
S3 – $57.52
S4 – $56.04