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Oil Surges as Ever Given Remains Grounded in Suez After Failed Rescue

A failed attempt to refloat the 224,000-ton Ever Given could extend the current backlog in the Suez Canal, costing global trade as much as $10 billion a week.

Global oil prices surged higher Friday after a second attempt to refloat the Ever Given in the now-deadlock Suez Canal failed to free the grounded container ship. 

Engineers with the Netherlands-based Bernhard Schulte Shipmanagement said rescuers will shift focus to dredging and removing "sand and mud from around the port sides of the vessel's bow" in order to dislodge it from where it ran around three days ago, creating a traffic backlog of nearly 200 ships in the world's busiest trade waterway. 

Around 10% of global trade by tonnage passes through the Suez Canal, including around 5.5 million barrels of crude, and an extended blockage could add even more pressure to global supply chains which are already stressed from COVID-related shortages and demand uncertainty. 

Germany-based insurance giant Allianz estimated Friday that the blockage could cost global trade between $6 and $10 billion a week.

"The Suez Canal is the gateway for the movement of goods between Europe and Asia, and welcomed over 19,000 ships in 2019, or 1.25 billion tons of cargo," Allianz estimated. "This represents around 13% of world trade so any blockage is likely to have a significant impact."

"The problem is that the Suez Canal blockage is the straw that breaks global trade’s back," the study noted. "Supply-chain disruptions since the beginning of the year (shortages of containers, semi-conductors, etc.) could cost real trade growth ... roughly $230 billion of direct impact, on top of the immobilization in the Suez Canal."

WTI crude futures for May delivery, the benchmark for U.S. oil and gas prices, jumped $2.62 higher on the session to $61.17 per barrel.

Brent crude contracts for May delivery, which are more tightly-aligned to global prices, were marked $2.61 per barrel higher at $64.56 in mid-day trading in New York, but are down around $6 from the January 2020 high of $71.38 reached on March 8.