Oil advanced for a second day in New York as protests in Egypt turned violent, prompting concern that crude supplies may be disrupted and unrest may spread to other parts of the Middle East.
Futures gained as much as 0.8 percent after clashes broke out between anti-government protesters and supporters of President Hosni Mubarak in Cairo. Jordan announced a change of government Feb. 1 after protests last week. About 2.5 percent of global oil production moves through Egypt via the Suez Canal and the Suez-Mediterranean Pipeline, according to Goldman Sachs Group Inc.
“If the Egyptian situation results in the removal of the current administration quickly, then the consequences may be that other regions will follow,” Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, said by telephone today. “It could create a contagion that could see the Middle Eastern premium being brought back in a big way because you do have that risk to the Suez.”
The March contract gained as much as 72 cents to $91.58 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.41 at 3:07 p.m. in Singapore. Yesterday, it climbed 9 cents to settle at $90.86. Futures have advanced 18.4 percent in the past year.
Brent crude for March settlement increased 87 cents, or 0.9 percent, to $103.21 a barrel on the London-based ICE Futures Europe exchange. It has risen 6 percent in the past five days, closing yesterday at $102.34, the highest since Sept. 26, 2008.
The contract’s 14-day relative strength index, a measure of how fast prices have risen or fallen, climbed to 71 today, the highest since Dec. 23, according to data compiled by Bloomberg. A reading of 70 or more can be taken as a sign that a market is “overbought” and ready to drop. New York crude’s RSI was 56.5.
Brent Premium
Brent’s premium to West Texas Intermediate, the crude grade traded in New York, widened to $11.82 a barrel today. The spread averaged 76 cents last year.
“The Brent-WTI spread widened as concerns that unrest in Egypt could spread to other nations and temporarily disrupt oil supply to Europe and Asia, while stockpiles continue to grow in the U.S.,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd., said in a note today.
U.S. crude inventories increased by 2.59 million barrels to 343.2 million in the week ended Jan. 28, the Energy Department said yesterday. They were forecast to climb 2.5 million barrels, according to analysts in a Bloomberg News survey.
Stockpiles at Cushing, Oklahoma, the delivery point for New York-traded West Texas Intermediate oil, climbed 667,000 barrels to 38.3 million, the highest since the department started keeping records at the storage hub in 2004.
Gasoline supplies rose 6.15 million barrels to 236.2 million, the highest since March 1993, the report showed. It was the biggest gain since January 2009. Analysts projected that supplies would climb 2 million barrels.
Egypt Unrest
Mubarak said Feb. 1 that he won’t stand down until elections in September. The Egyptian army said protesters should return to their homes, in a statement by a military spokesman on state television. It came hours after President Barack Obama said the transition to democracy must “begin now.”
Crude capped the biggest two-day rally since May on Jan. 31 on concern the unrest in North Africa will spread to crude- producing countries in the Middle East. Jordan’s Prime Minister Samir Rifai resigned and King Abdullah asked Marouf Bakhit to form a new government.
The Jordanian announcement and Egyptian protests follow a revolt in Tunisia that forced President Zine El Abidine Ben Ali into exile on Jan. 14. Saudi Arabia, the United Arab Emirates and Kuwait, three of the Organization of Petroleum Exporting Countries’ biggest oil producers, are located on the Arabian Peninsula and haven’t seen unrest.
Posted By: DAVID JOHNSON
Thursday, February 3rd 2011 at 3:57AM
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