Oil prices almost score $100 on Egypt unrest

31st January 2011, Comments 0 comments

World oil prices rose to within a whisker of $100 a barrel Monday on fears that violent unrest in Egypt could disrupt the flow of oil through the Suez Canal on its way to the West, analysts said.

However the market soon reversed direction as OPEC's chief said the cartel stood ready to raise oil output should the Egypt crisis hinder supplies.

Brent North Sea crude for delivery in March struck $99.97 a barrel in Asian deals -- the highest level for 28 months. Crude last hit $100 dollars in October, 2008.

In later London trade, Brent pulled back to stand at $98.95, down 47 cents compared with the close on Friday.

New York's main contract, light sweet crude for March, dipped four cents to $89.30 a barrel.

The brief push towards $100 reflected "continued tension in Egypt and the possibility that there would be (supply) constraints through the Suez Canal," said Ben Westmore, minerals and energy economist for National Australia Bank.

Tom Bentz of BNP Paribas said that about one million barrels of oil pass each day through the Suez Canal, a key transit route for shipments from the Persian Gulf region.

"There is some nervousness about supplies and that could affect Europe more than the US," he said.

Danish shipping and oil group A.P. Moeller-Maersk said it was suspending activities in Egypt, amid growing fears over the unrest rocking the country, but said ships would continue sailing the Suez canal.

The deputy head of the International Energy Agency, Richard Jones, warned that political unrest in North Africa and the Middle East was a "key" uncertainty hanging over oil markets.

OPEC secretary-general Abdalla Salem El-Badri warned that "there could be a real shortage" of crude oil passing through the Suez.

"If we see a real shortage, we will need to act," he told reporters on the sidelines of an oil conference in London.

However, El-Badri stressed that "the market is well supplied" with strong inventories and "demand is less than last year" at this time.

The OPEC chief added that he saw no need for an emergency production meeting ahead of the next scheduled gathering in Vienna in June.

The Organization of Petroleum Exporting Counties pumps about 40 percent of the the world's oil, with the bulk coming from member Saudia Arabia.

"The greater fear is that the (Egypt) turmoil could spread to other Middle East countries, including even Saudi Arabia. If that happens, then all bets on oil prices are off," said Sharon Zollner, a senior economist at ANZ Bank.


© 2011 AFP

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