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04 December 2023

Oil tops $103 on Egypt violence, Yemen

A London taxi driver uses a petrol pump in central London (AFP)

By Reuters

Brent crude rose above $103 a barrel on Thursday after violent clashes in Egypt raised concern of supply disruptions and unrest across the Middle East, overshadowing ample supplies in top consumer the United States.

The crisis in Egypt has raised the prospect of disruption to supply of Middle East oil shipped through Egypt and of unrest spreading across the Middle East and North Africa, which combined produce more than a third of the world's oil supplies.

Brent crude for March rose as much as $1.03 to $103.37 a barrel, the highest intraday price since Sept. 26, 2008, and was up 56 cents at $102.90 at 1119 GMT. US crude for March rose $1.03 to $91.89.

"Everybody is watching Egypt, we are looking at Yemen too," said Christophe Barret, oil analyst at Credit Agricole in London. "Mainly, it's fear of contagion to other countries.

"I think prices above $100 for Brent are just not sustainable, it's something that has a very strong impact on the economy, a strong impact on demand."

On Thursday, supporters of President Hosni Mubarak opened fire on protesters in Cairo's Tahrir Square, killing at least five people, in a fresh spike in violence over an unprecedented challenge to his 30-year-old rule.

In Yemen, more than 20,000 people filled the streets of Sanaa on Thursday for a "Day of Rage" rally, demanding a change in government and saying President Ali Abdullah Saleh's offer to step down in 2013 was not enough.


Oil's rally has put pressure on the Organization of the Petroleum Exporting Countries to increase output.
Opec has maintained supply is adequate and said it has no plan to meet before its next scheduled gathering in June.

Royal Dutch Shell Chief Executive Peter Voser said that Opec's idle production capacity of 5 million barrels per day (bpd) -- more than the 2 million bpd it held in 2008 when oil spiked to a record $147 a barrel -- could help prevent a surge in prices this year.

"In the absence of geopolitical factors, this may well cushion the markets from a spike in 2011," Voser said at a news conference to discuss Shell's results.

So far, the crisis has not affected traffic on the Suez Canal or flows on the Suez-Mediterranean (SUMED) oil pipeline. Egypt controls both routes, which together moved over 2 million bpd of crude and oil products in 2009.

Ben Westmore, commodities economist at National Australia Bank, said that plentiful oil supply could weigh on prices when concern over Egypt eases.

"Once the tensions there begin to moderate, then you will have the market focusing again on fundamentals. We still have this abundant supply, so there is definitely more downside than upside," he said.

US crude inventories rose last week, a government report showed on Wednesday. Stocks at Cushing, Oklahoma, the delivery point for US futures, hit a record, keeping the pressure on the US marker relative to Brent.

In other markets, European shares were lower as traders awaited details of the European Central Bank's meeting and its plans to fight inflation, while Shell's share prices fell after earnings lagged expectations.

Copper, a key industrial metal, hit a record high on Thursday on expectations of strong global demand, while the dollar was little changed against a basket of currencies.