Energy Report: Clogged Artery

The Suez Canal is still clogged up, cutting off circulation to the global oil market. The MV Ever Given container ship is still stuck blocking the waterway as reported and anywhere from 165 to 185 vessels are waiting to resume trips to their destinations. The longer it takes, the bigger the hit we may see to the global economy.

Bloomberg News reports, “a back-of-the-envelope calculation shows there’s about $9.6 billion worth of daily marine traffic halted by the massive container vessel that lodged in the Suez Canal earlier this week, blocking transit in both directions. The figure is based on an assessment by Lloyd’s List that suggests westbound traffic is worth around $5.1 billion a day and eastbound traffic approximately $4.5 billion. The industry journal concedes that these are “rough calculations,” however. About 185 vessels are waiting to transit the waterway, data compiled by Bloomberg show, while Lloyd’s estimated 165.

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Now some reports suggest that it might take until Sunday to finally reopen the canal. That is when the tide rises. Oil traders bought on the clogged arteries news but many know that if that is the only reason for buying, it will have a limited shelf life. Already, new oil shipments will look at alternative routes, and the canal at some point will reopen. Still, oil recovery was substantial, and it was helped also by strong record-breaking German manufacturing data and some bullish leading oil indicators in yesterday's Energy Information Administration (EIA) weekly petroleum status report.

The EIA reported that U.S. crude oil refinery inputs jumped to an average of 14.4 million barrels per day. That was an impressive 1.0 million barrels per day more than the previous week’s average. We saw a big jump in runs as refineries operated at 81.6% of their operable capacity last week. Still, gasoline production decreased averaging 8.6 million barrels per day. Refiners have work to do. Distillate fuel production increased last week, averaging 4.6 million barrels per day. Bottom line, we should see crude draws going forward as refiners continue to increase runs and US imports fall.

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