Crude oil prices on the Brent benchmark inched higher this Friday after the scale of the blockage of the Suez Canal became public.
Brent crude is up nearly 4.7% after attempts to float the 1300-ton Ever Given vessel that was blown by strong winds across the width of the canal entered into the 4th day without success. This has caused a huge traffic backlog that now threatens not just the transport of crude oil by supertankers but also global aviation.
Vessel companies are now starting to consider the use of alternative transport routes, such as the route that takes vessels around the Cape of Good Hope in South Africa, which is a longer route that dramatically increases costs and elongates travel times by as much as 10 days. The Cape of Good Hope was discovered centuries ago by Portuguese Explorer Bartolomeu Dias and was a crucial shipping route that connected Europe and Africa to Asia before the Suez Canal was opened in 1869.
Next week, the OPEC + alliance will meet to review the current production curbs, which are due to expire in April. A decision on whether to maintain the status quo, or to cut/increase production curbs could have an impact on crude oil prices.
Technical Outlook for Crude Oil Price
The active daily candle has violated the 64.26 resistance to the upside. There has to be a closing penetration of at least 3% above this resistance to confirm the break, allowing bulls to aim for 65.95 (22 February and 1 March highs), which is the next logical target. Above this level, further resistance barriers exist at 66.81 and 67.74. These may be tested if the Suez situation continues, or if the OPEC + alliance returns with a vote to hold or increase production curbs.
On the other hand, failure to establish a breakout penetration above 64.26 allows crude oil prices to pull back towards 62.21, with 60.07 and 57.47 standing in the way of bears as downside barriers. This outlook is favoured if OPEC + scales back production curbs or if the Suez Canal situation improves.