Oil prices climb on mounting Egypt tensions

11th February 2011, Comments 0 comments

World oil prices climbed Friday as heightened tensions in Egypt fuelled concerns about possible disruption to crude supplies through the Suez Canal, analysts said.

Brent North Sea crude for delivery in March jumped 88 cents to $101.75 a barrel.

New York's main contract, light sweet crude for March, climbed 68 cents to $87.41.

"The crisis in Egypt may take on a more menacing tone, increasing the risk of interruptions to the Suez Canal," analysts at research group JBC Energy said in a note to clients Friday.

"Market participants are confident that sufficient spare shipping capacity and marginal additional costs of re-routing ... around the southern tip of Africa should keep supplies ample.

"However, the uncertainty caused by the whole situation is racking up oil markets," they added.

Conflict in Egypt could disrupt crude supplies passing through the Suez Canal, which provides a link between Europe and Asia and allows ships safer and faster travel between the regions without having to sail around Africa.

While Egypt is not a major crude producer, the canal carries about 2.4 million barrels of crude daily, roughly equal to the output of Iraq or Brazil.

Furious Egyptian protesters vowed Friday to step up their campaign against President Hosni Mubarak, pouring back into the streets of Cairo after he refused to quit office.

Mubarak's declaration late Thursday wrong-footed global leaders and enraged hundreds of thousands of demonstrators who had occupied parts of central Cairo expecting to hear him drop the curtain on his 30-year rule.

Instead, he delegated much of his power to his ally and former intelligence chief Omar Suleiman, while vowing that he would stay in office until September and one day die in Egypt.

Oil market analysts also said that the unrest in Egypt was helping to maintain a large gap between the prices of Brent and the benchmark New York crude contract on West Texas Intermediate oil.

"The spread between WTI and Brent currently stands at around $14 a barrel. Brent is driven higher by a supply risk premium due to the Egyptian situation and by disruptions in North Sea production," said Filip Petersson at SEB Commodity Research.

"WTI is under pressure from transport bottlenecks between Cushing, the WTI pricing point, and consumers. In addition, a local product oversupply is weighing on demand expectations since refineries may cut down on production," he added.

© 2011 AFP

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