Oil breaks through $103 on Egyptian crisis | business | Hindustan Times
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Oil breaks through $103 on Egyptian crisis

business Updated: Feb 03, 2011 11:04 IST

World oil prices extended their gains in Asian trade on Thursday after the political crisis in Egypt erupted into violence.

At least two people were killed and many were wounded overnight in gunfire aimed at protesters in central Cairo demanding the ouster of President Hosni Mubarak, according to witnesses.

The market has been jittery following more than a week of anti-government protests in Egypt due to fears the crisis could spill over to other countries in the crude-rich but politically volatile Middle East.

Brent North Sea crude for March soared 88 cents to 103.22 in afternoon Asian trade.

New York's main futures contract, light sweet crude for March, climbed 65 cents to $91.51.

Ken Hasegawa, energy desk manager at Newedge brokerage in Tokyo, said the violent clashes in Egypt prompted investors to buy oil amid expectations prices could rise further.

"The latest news from Egypt triggered short-covering and fresh buying from funds," Hasegawa told AFP, adding he expects Brent crude to reach $105.

"So far there is no factor to prompt traders to sell. We don't see any sellout in the market at the moment."

He said the spread in the price between Brent crude and the benchmark New York contract is likely to widen further because of oversupply in the US port of Cushing in Oklahoma.

"The unfolding of the situation in Egypt has injected a burst of volatility and uncertainty into oil markets," Barclays Capital analysts said in a client note.

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.

Since the outbreak of unrest in Egypt more than a week ago, oil prices have risen on fears of disruption to the artificial waterway that links the Mediterranean and the Red seas.

"The situation introduces risks and uncertainties that are likely to be highly significant in terms of the broader political evolution of the region," analysts at Barclays Capital said.

Oil prices were climbing despite data showing weak demand in the United States, the world's biggest oil consumer.

The latest weekly stockpiles report from the US Department of Energy showed reserves had increased sharply for the third week in a row.

Crude oil stocks rose 2.6 million barrels to 343.2 million in the week ending January 28, in line with expectations.

At the almost-full depot at Cushing reserves rose 600,000 barrels to 38.3 million.