The market is expected to dip on weak leads from Wall Street, but not these ASX shares that will benefit from the accident along the Suez Canal.
The Brent oil price surged 5.7% to US$64.23 a barrel while the WTI benchmark rallied 5.9% to US$61.18 a barrel.
In contrast, the S&P/ASX 200 Index (Index:^AXJO) is expected to dip 0.2% this morning.
ASX energy shares get boost from Suez blockage
While ASX shares exposed to the oil price are likely to outperform, there will be questions about how long the rally can last.
Up to 10 crude tankers carrying around 13 million barrels of oil could be stuck in the bottleneck long the Suez Canal, reported Oilprice.com.
The key shipping channel linking Europe and Asia has been blocked after a tanker ran aground along the narrow man-made canal that opened in 1869.
Authorities are trying to free the vessel but with little success. It could take another day or two to free the trapped container ship.
In the meantime, around 50 vessels per day are waiting to cross the canal. Sailing around the Suez will add an extra 15 days.
Around 9 % of total seaborne traded petroleum and 12% of global trade flows through this channel, according to the U.S. Energy Information Administration.
Oil market interrupted in a good way for once
The top three exporters of crude oil and oil products via the Suez Canal so far in 2021 were Russia with 546,000 barrels per day (bpd), Saudi Arabia with 410,000 bpd, and Iraq with 400,000 bpd, reported Oilprice.com which sourced data from oil analytics firm Vortexa.
China is among the top three importers of crude and oil products that are shipped through the Suez Canal.
The cargo ship at the centre of the accident, Ever Given, is a 400-meter giant and is one of the largest vessels that sails through the Suez Canal. Ever Given is wedged sideways along the embankment on Egypt’s side, blocking the narrowest part of the canal.
It’s not a question of “if” but “when” Ever Given will be re-floated. When that happens, the oil price could surrender recent gains.
At least for the moment, the turnaround in oil will provide some relief to the ASX energy sector. These ASX shares have been hit hard by a large drop in crude due to worries of waning demand and excess supply.
Those fears could soon remanifest as they linger for longer than Ever Given.