London, March 25 (AFP/APP): Owing to renewed virus restrictions due to the third wave of COVID19, oil prices slumped Thursday, a day after spiking over the closure of the Suez canal. Both Paris and Frankfurt stocks finished with small gains after having spent most of the day lower. London fell as shares in energy companies were hit by the oil price drop. Wall Street was steady in midday trade, after having initially moved lower despite US new unemployment claims last week coming in lower than expected, dropping below 700,000 for the first time since the pandemic.
The drop in US first time jobless claims by nearly 100,000 over the past week, along with a fall in continuing claims by 264,000, fit “the bill of an improving economy that requires increased hiring activity and reduced layoff activity,” said Briefing.com analyst Patrick O’Hare.
But the prospect of a strong economic rebound has been stoking fear that prices will soar, forcing central banks to reel in ultra-low monetary policies that have supported the rally in global equities. That has led to volatile trading as US stocks have pushed to record highs. CMC Markets UK analyst Michael Hewson said comments by US Federal Reserve Chairman Jerome Powell on Thursday that the combination of monetary and fiscal stimulus would help speed economic recovery had rekindled fears among investors.
“Reading between the lines, markets appear to have taken that to mean the Fed might feel compelled to pare back some of its own extraordinary measures sooner than expected, thus prompting some further profit taking from recent peaks,” said Hewson.
Demand concerns trump canal closure
Crude prices had jumped by almost six percent on Wednesday in response to a giant container ship getting stuck in the Suez Canal, blocking one of the world’s busiest shipping routes. But oil prices tumbled on Thursday, completely wiping out those gains at one point.
“Oil prices corrected excess gains that accumulated from the Suez Canal blockade as the disruption’s effect is likely not one that will last too long,” said Bjornar Tonhaugen at energy consultancy Rystad.
Egypt closed the canal on Thursday and there were warnings it could take weeks to free the container ship. Although the canal is responsible for the transit of 10 percent of global oil production, following the initial shock traders have returned to larger concerns about the impact of pandemic lockdowns on the economy.
“Crude prices are lower as the short-term demand outlook continues to get downgraded as many European countries seem nowhere near to easing restrictions,” said OANDA analyst Edward Moya. Oil prices had tumbled by similar amounts on Tuesday on such worries about energy demand given renewed Covid-19 lockdowns. Only earlier this month oil prices struck a 14-month high — returning to pre-pandemic levels — on reopening optimism.
Key figures around 1630 GMT
- West Texas Intermediate: DOWN 4.9 percent at $58.20 per barrel
- Brent North Sea crude: DOWN 4.1 percent at $61.77 per barrel
- New York – Dow: FLAT at 32,415.13 points
- EURO STOXX 50: DOWN 0.2 percent at 3,826.22
- London – FTSE 100: DOWN 0.6 percent at 6,674.83 (close)
- Frankfurt – DAX 30: DOWN less than 0.1 percent at 14,621.36 (close)
- Paris – CAC 40: UP less than 0.1 percent at 5,942.41 (close)
- Tokyo – Nikkei 225: UP 1.1 percent at 28,729.88 (close)
- Hong Kong – Hang Seng: DOWN 0.1 percent at 27,899.61 (close)
- Shanghai – Composite: DOWN 0.1 percent at 3,363.59 (close)
- Euro/dollar: DOWN at $1.1780 from $1.1813 at 2200 GMT
- Pound/dollar: UP at $1.3729 from $1.3686
- Euro/pound: DOWN at 85.80 pence from 86.31 pence
- Dollar/yen: UP at 109.14 yen from 108.73 yen
Stay tuned to Baaghi TV for latest news and updates!