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North Sea oil near 28-month high, all eyes on Egypt

business Updated: Feb 02, 2011 17:13 IST

Oil rose on Wednesday with North Sea Brent crude futures near a 28-month high on concerns unrest in Egypt would trigger regime change across the Middle East and North Africa, source of more than a third of the world's oil.

Egyptian President Hosni Mubarak has said he will surrender power in September, angering protesters who want an immediate end to his 30-year rule.

US President Barack Obama, French President Nicolas Sarkozy and Turkish Prime Minister Tayyip Erdogan have all called for a rapid transition in Egypt.

ICE Brent for March rose 5 cents to $101.79 a barrel by 1100 GMT, after touching $102.08 on Tuesday, the highest price for a front-month contract since September 2008. US crude gained 30 cents to $91.07.

"We suspect that the yet unresolved political standoff in Egypt will likely keep oil prices fairly well bid, at least for the balance of the week," said Edward Meir, senior commodities analyst at brokers MF Global.

Credit Suisse analysts agreed, saying price risks would remain "skewed to the upside" as long as geopolitical tensions in Egypt remained unresolved: "We expect oil prices to ease once tensions fade due to ample global inventories."

Mubarak's departure would reconfigure the Middle East, with implications from Israel to oil giant Saudi Arabia.

King Abdullah of Jordan replaced his prime minister on Tuesday after protests.

Yemeni President Ali Abdullah Saleh said on Wednesday he would not seek to extend his presidency in a move that would bring an end to three decades of rule when his term expires in 2013. Saleh also vowed not to pass on power to his son.

Sudan has also seen unrest, after Tunisia's president was overthrown by demonstrations last month.


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.

At the back of many investors' minds is an unspoken worry that unrest in North Africa could fuel similar protests in bigger oil producers such as Libya or even Saudi Arabia, stirring fears of a temporary disruption to oil supplies.

The International Energy Agency said the oil market did 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 did not need to meet to discuss oil policy in February because the market is well supplied and $100-per-barrel prices were justified.

US crude oil stocks rose a greater-than-expected 3.8 million barrels last week, the API said on Tuesday, while inventories at Cushing, Oklahoma, climbed 667,000 barrels.

Brent's premium to US crude futures jumped to about $11 a barrel from $8.50 after the American Petroleum Institute on Tuesday reported an increase in crude stockpiles at the Cushing delivery point for the US futures benchmark.

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 data on inventories and demand from the Energy Information Administration follow on Wednesday at 1530 GMT.

Ahead of the API report, a Reuters survey of analysts 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.