Brent near 28-mth high, Egypt stays in focus
Oil was steady on Wednesday, with Brent close to a 28-month high, on concerns that anti-government protests in Egypt would trigger a wave of regime change in the Middle East and North Africa, source of more than a third of the world's oil.business Updated: Feb 02, 2011 12:48 IST
Oil was steady on Wednesday, with Brent close to a 28-month high, on concerns that anti-government protests in Egypt would trigger a wave of regime change in the Middle East and North Africa, source of more than a third of the world's oil.
Egyptian President Hosni Mubarak said on Tuesday he would surrender power in September, angering protesters who want an immediate end to his 30-year-rule.
ICE Brent for March shed 33 cents to $101.41 a barrel at 0602 GMT, after touching $102.08 on Tuesday, the highest price for a front-month contract since September 2008. U.S. crude fell 30 cents to $90.47.
"With geopolitical tensions in Egypt remaining unresolved, price risks remain skewed to the upside," said Credit Suisse analysts including Stefan Graber. "We expect oil prices to ease once tensions fade due to ample global inventories."
Mubarak's departure would reconfigure the politics of the Middle East, with implications from Israel to oil giant Saudi Arabia. King Abdullah of Jordan replaced his prime minister on Tuesday after protests. Yemen and Sudan have also seen unrest, after Tunisia's president was overthrown by demonstrations last month.
And although the unrest in Egypt has so far had no effect on transit through the Suez Canal or the Suez-Mediterranean (SUMED) oil pipeline, shipping sources said there were major disruptions in Egypt's Alexandria and Damietta ports due to staff shortages and an absence of customs officials.
Egypt controls the canal and the pipeline, which together moved over 2 million barrels per day (bpd) of crude and oil products in 2009.
The International Energy Agency said the oil market does not face any emergency, but called on OPEC to remain "flexible" in the event unrest affects supply.
The Organization of the Petroleum Exporting Countries has refrained from boosting production and sees no supply shortage.
OPEC member Libya's top oil official told Reuters the group does not need to meet to discuss oil policy in February because the market is well supplied and $100-per-barrel prices are justified.
What really worries traders is that unrest in Tunisia and Egypt could fuel similar protests in bigger oil producers such as Libya -- or even Saudi Arabia, according to Christopher Swann, a Reuters Breakingviews columnist.
This would create massive uncertainty over oil supplies -- though even the most extreme Islamic governments remain happy to profit from oil sales, Swann writes.
U.S. crude oil stocks rose a greater-than-expected 3.8 million barrels last week, the API said on Tuesday, while inventories at Cushing climbed 667,000 barrels.
Brent's premium to U.S. benchmark West Texas Intermediate futures jumped to about $11 a barrel from $8.50 on Tuesday after the American Petroleum Institute reported an increase in crude stockpiles at the Cushing, Oklahoma delivery point for WTI.
Gasoline stocks also rose more than expected, by 3.9 million barrels, while distillate stocks, which include heating oil and diesel fuel, fell 1.1 million barrels, the API said.
Government statistics on inventories and demand from the Energy Information Administration will follow on Wednesday at 1530 GMT.
Ahead of the API report, a Reuters analyst survey forecast crude stocks to be up 2.7 million barrels, with distillate stocks slipping 700,000 barrels and gasoline inventories rising 1.9 million barrels.