Tags: Oil Rises From Eight-Week Low on Concern Egyptian Unrest to Spread

Oil Rises From Eight-Week Low on Concern Egyptian Unrest to Spread

Friday, 28 Jan 2011 12:24 PM

Oil jumped from an eight-week low as unrest in Egypt raised concern that protests would spread to major oil-producing parts of the Middle East.

Crude gained as much as 3 percent after a day of clashes between police and protesters demanding an end to Egyptian President Hosni Mubarak’s 30-year regime. The unrest in Egypt followed an uprising that led to the Jan. 14 overthrow of Tunisian President Zine El Abidine Ben Ali.

“Tunisia isn’t a big oil producer, and Egypt isn’t a big oil producer, but it’s moving closer to the oil fields,” said Phil Flynn, vice president of research at PFGBest in Chicago. “This thing seems to be spreading from border to border.”

Oil for March delivery increased $2.31, or 2.7 percent, to $87.95 a barrel on the New York Mercantile Exchange. The contract has fallen 1.3 percent this week and has risen 19 percent in the past year.

Authorities tried to prevent rallies today at points across Cairo, a city of 17 million, where protesters chanting “liberty” and “change” assembled to demand Mubarak’s ouster.

“It looks like there is a lot of worry in the market about a possible closure of the Suez Canal because of the escalating tensions in Egypt,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “That makes perfect sense about the rally we’re seeing in the crude market.”

The Suez Canal, which connects the Mediterranean and Red Seas, moved 1 million to 1.6 million barrels a day of oil and refined products north to Europe and other developed economies in 2008 and 2009, according to the Energy Information Administration, the statistical arm of the U.S. Energy Department. The EIA identified the canal as one of seven “world oil transit chokepoints” in a report earlier this month.

Oil Supply

“We have plenty of oil and plenty of oil reserves, so from a numbers standpoint, it’s not that big a deal,” PFGBest’s Flynn said. “From a psychological standpoint, it is a big deal. The momentum of discontent is building, and people are starting to get nervous, especially going into the weekend.”

Brent crude for March settlement rose $1.36, or 1.4 percent, to $98.75 a barrel on the London-based ICE Futures Europe exchange.

New York futures narrowed their discount to North Sea Brent to $10.80 a barrel. The differential reached more than $12 a barrel on an intraday basis after Energy Department data showed stockpiles grew 2.3 percent in the U.S. storage hub at Cushing, Oklahoma, last week.

Household Purchases

Crude oil also rose as household purchases climbed at a 4.4 percent pace in the fourth quarter, following a 2.4 percent increase in the prior three months. The gain in consumer spending compared with a 4 percent median forecast of 85 economists surveyed by Bloomberg News.

U.S. gross domestic product grew 3.2 percent between October and December, the fastest since the first quarter. It was up from a 2.6 percent rate in the previous three months. The most recent figure fell short of the 3.5 percent in the survey.

OPEC oil output rose 210,000 barrels, or 0.7 percent, to an average 29.395 million barrels a day in January, the highest level since December 2008, according to a Bloomberg News survey of oil companies, producers and analysts. The increase was led by gains in Iraq and Saudi Arabia.

The International Energy Agency has asked OPEC to watch global demand closely and adjust its production accordingly, amid oil prices that neared $100 a barrel earlier this month, Nobuo Tanaka, the IEA’s executive director, said in an interview today in Davos, Switzerland.

“We are sending a message to the OPEC countries to be flexible, asking them to watch the oil prices and make proper decisions,” he said. “This oil price is a detriment to world economic recovery.”

Abdulla El-Badri, secretary-general of the Organization of Petroleum Exporting Countries, said in an interview today with CNBC in Davos that he sees no need to “interfere” in the oil market and won’t hesitate to act if required.

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Oil jumped from an eight-week low as unrest in Egypt raised concernthat protests would spread to major oil-producing parts of the MiddleEast.Crude gained as much as 3 percent after a day of clashes betweenpolice and protesters demanding an end to Egyptian President...
Oil Rises From Eight-Week Low on Concern Egyptian Unrest to Spread
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2011-24-28
Friday, 28 Jan 2011 12:24 PM
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