Oil Price and Lingering Suez Factor

 

Suez blockade

The container ship that has been stranded in the Suez Canal since Wednesday has moved about 100ft into the middle of the canal from where it was, according to the latest report.

When it’s going to be at the centre of the canal, however, is anybody’s guess at present; it appears to be much complicated than originally thought, due to its sheer size, length and the weight of its cargo.

As the gap between one end of the ship and the bank of the canal is not very wide, the salvage crews have been forced to go at a slow pace – for obvious reasons.

As the last resort, meanwhile, Egypt’s President Abdel Fattah el-Sisi, has ordered the Egyptian authorities to lighten the ship in order to make it movable easily; if everything else fails, they may be compelled to go for the option despite multiple disadvantages it poses.

If the Egyptian authorities decide to go ahead with the plan, although it makes sense in the protracted operations without an end in sight, the process will take days to complete while making the ships and the boats in the queue behind the stricken liner stay even longer; there are reports that say about the presence of live animals inside some of those ships.

Some companies, having waited for days for a breakthrough, are taking the alternative, despite the increased cost and the significant time – taking the pre-Suez route around Africa.  

The blockade has already started making an impact on the crude oil market across the world. In addition, some countries, such as war-torn Syria has begun rationing fuel to deal with a potential energy crisis.

Weekly oil price


In a new twist, meanwhile, the chief of the SCA, Suez Canal Authority, says that they will look into the possible human error in the incident too, although high gusts of wind are still thought to be the main factor for the mishap.

The presidential order to expedite the operation comes amidst the frustration of the companies whose ships have been in anchor for days with their precious cargo. The losses suffered by Egypt are very significant too – revenue loss of about $14million a day.

Amidst the turmoil in the Suez Canal, the oil price rose again, reversing both the downward trend and the palpable negative sentiment.

The impact of the success of the salvage operations on the crude oil price is something that remains to be seen in the next week.

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