NEW YORK: Oil prices rose on both sides of the Atlantic, and Brent hit a four-month high yesterday on fears that escalating violence in Egypt could affect the Suez Canal or spread across the Middle East, where supplies already face disruptions.
While Egypt is not a major producer of crude oil, it is home to the strategically important Suez Canal and the Sumed pipeline. Investors fear the unrest could choke supply routes or spill over into oil-exporting neighbours.
“Disruptions at the Suez Canal are unlikely, but markets never move on what’s likely. They move on fear,” said Michael Hewson, an analyst at CMC Markets.
The Suez Canal and Egyptian ports were operating normally, shipping sources said yesterday.
Front-month September Brent was trading 75 cents higher at $110.95 at 2:12 pm EDT (1812 GMT) after earlier rising more than a dollar to $111.53, its highest since April 2. The more actively traded October contract rose 58 cents to $109.40.
US oil rose 12 cents to $106.97.
Brent’s premium to U.S. crude stood at $3.98, after earlier increasing to $4.05, the widest since early July and close to its 50-day moving average of $4.29.
The front-month US crude contract briefly slipped around 9:15 am EDT (1315 GMT), as US stock futures fell after a weaker-than-expected earnings report by global retailer Wal-Mart Stores Inc.
US equities fell on investor concerns the Federal Reserve will soon start to scale back its stimulus after a raft of data on housing, inflation and jobless claims pointed to a recovering economy.
“Once the housing data came out, the market turned around and ran right back up towards its highs, in spite of the fact that equity markets are falling today,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.
WEATHER RISK
Libya has restarted refined-product exports from its largest refinery, Ras Lanuf, but most crude oil terminals including Es Sider, the biggest, remain blocked by protests, with exports still running at less than half of normal.
Libya’s prime minister said yesterday that the head of the protestors wanted to export oil independently of the state oil company, but warned the state would use any means necessary, including military action, to prevent such sales.
On Wednesday, the deputy oil minister said output had fallen to 600,000 barrels per day (bpd) due to field problems, from a post-Gaddafi era peak of around 1.4 million bpd.
In Iraq, officials said the government was undecided about whether to carry out full maintenance on its Basra export terminal in September, creating more uncertainty.
“As long as Libya does not return to exporting crude oil, it will be difficult for markets to significantly weaken. Run cuts will reduce some demand for crude oil, but run cuts are not a long-term solution to a supply disruption,” said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.
“We now have to add for this weekend a weather risk as we are starting to get some candidates on the tropical front.”
The US National Hurricane Center said that a weather disturbance in the Caribbean had a 50 percent chance of becoming a tropical cyclone in the next 48 hours, potentially affecting oil installations in the Gulf of Mexico.
Marathon oil said yesterday it was evacuating non-essential staff from its facility in the Gulf of Mexico, though production had not been affected so far.
Reuters
