Oil price keeps above $102, with all eyes on Egypt

4th February 2011, Comments 0 comments

World oil prices held above $102 on Friday, with the market under persistent pressure from the ongoing political crisis in Egypt.

Brent North Sea crude for delivery in March rose 43 cents to $102.67 per barrel in London trade, one day after striking $103.37 -- the highest level since September 26, 2008.

New York's main futures contract, light sweet crude for March, gained 46 cents to $91.00 per barrel.

Analysts expect the spread in the price between Brent crude and the benchmark New York contract, also known as West Texas Intermediate (WTI), to widen further because of oversupply in the US port of Cushing, Oklahoma.

Brent spiked back above $100 this week, rocked by violent protests in Egypt that have raised serious concerns about the security of energy supplies travelling via the Suez canal to the West.

Egyptian protesters massed on Friday for sweeping "departure day" demonstrations, in an attempt to force President Hosni Mubarak to quit after he said he would like to step down but fears chaos would result.

Tens of thousands filled Cairo's central Tahrir Square, the epicentre of the 11 straight days of protests that have shaken the pillars of Mubarak's three-decade rule, on the Muslim day of rest.

"Oil markets are still on edge regarding possible worsening of turmoil centred on Egypt," said Sucden analyst Brenda Sullivan.

"Today is the called-for 'day of departure' ... President Mubarak has said he wants to go, but he fears worsening of the situation if he were to step down now.

While Egypt is not a major crude producer, the country is home to the Suez Canal, which carries about 2.4 million barrels daily, roughly equal to Iraq's output.

"Thus far transit through Egypt has not been seen to have been affected, but the risk to transport as well as the risk of supply disruptions in other nations in the region are likely to continue as a major factor in the energy markets for some time," added Sullivan.

Traders are also concerned about the wider ramifications of the events in Egypt on the oil-rich but politically volatile Middle East.

Research house Capital Economics said oil prices were also being buoyed by strong global energy demand.

"The bulk of the rise in oil prices over the last few months reflects buoyant global demand rather than uncertainty in the Middle East," it said in a research note.

"OPEC has plenty of spare capacity. Of course, oil prices would surely rise much further if there were any serious disruption to production elsewhere in the region or to traffic through the Suez Canal," it added.

"But there is still no sign of this and little reason to expect it. In particular, none of the major players in this crisis, and certainly not any new government trying to find its feet, would have any desire to lose the business from the canal."

Later on Friday, meanwhile, traders' attention will turn to crucial January non-farm payrolls jobs data from the United States, for cues on the health of the world's largest oil-consuming nation.

Federal Reserve chairman Ben Bernanke said the economic recovery was gaining pace, but cautioned that victory could not be declared until the jobs market improved.

The oil market was also bolstered this week by upbeat manufacturing data in China, Germany and the United States. That sparked hope of a strengthening global economic recovery.


© 2011 AFP

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