Oil prices rebound on fears Suez Canal blockage may last weeks

Oil prices bounced back on Friday from a plunge a day earlier on concerns that a large container ship that ran aground in the Suez Canal may block the vital shipping lane for weeks, squeezing supply.

Prices, however, were still headed for a third consecutive weekly loss.

Brent crude was higher by 43 cents, or 0.7%, at $62.38 a barrel by 0028 GMT, after dropping 3.8% on Thursday.

U.S. West Texas Intermediate (WTI) crude was up 49 cents, or 0.8%, at $59.05 a barrel, having tumbled 4.3% a day earlier.

Both benchmarks were on track for a weekly loss of more than 3%, following a more than 6% decline last week.

The trapped container ship is blocking traffic in the Suez Canal, one of the world's busiest shipping channels for oil and refined fuels, grain and other trade between Asia and Europe.

Also read: Entire 25-member crew of cargo ship stuck in Suez Canal is Indian

Officials stopped all ships entering the canal on Thursday, and a salvage company said the vessel may take weeks to free.

"Expectations that the blockage of the Suez Canal may last for weeks raised fears of supply tightness in oil markets," said Nissan Securities researcher Yasushi Osada.

"But lingering worries that a fresh wave of lockdowns in Europe and elsewhere may slow a recovery of global fuel demand are expected to limit price gains," he said.

Countries in Europe are renewing restrictions to curb the spread of COVID-19, which will likely reduce fuel demand from the region. Germany, Europe's largest economy, has seen its biggest increase in coronavirus cases since January.

In parts of western India, authorities ordered people indoors as new infections hit the highest level in five months.

The oil market was also under pressure as producers had difficulty selling to Asia, especially China. Asian buyers instead took cheaper oil from storage while refinery maintenance has reduced demand, industry sources said.