Lest we forget where this all came from.
Oil
soars on Egypt turmoil, tops $110 per barrel
Brent
oil jumped to a four–month high on Thursday on fears a new wave of
political turmoil in Egypt could disrupt supplies through the Suez
Canal.
RT,
15
August, 2013
Unrest
has reawakened in Egypt after a brief period of stabilization, and
with protesters taking to the streets and the death toll mounting,
oil prices are soaring over fears of instability.
Brent
futures advanced to a fourth-month trading day high, hitting $111.23
per barrel at 14:02 MST.
"I
think Brent has the potential to go as high as $113 to $114 but not
much higher," Michael Hewson, an analyst at CMC Markets, told
Reuters.
September
futures of West Texas Intermediate oil (WTI) rose to $107.84 a barrel
at 14:02 MST, gaining for the fifth day. Futures in London climbed as
much as 1.2 percent, the highest prices since April 2.
Oil
prices were in part boosted after US crude inventories fell 2.8
million barrels, hitting a stockpile low since March 2012, the Energy
Information Administration (EIA) announced Wednesday. A decline of
1.5 million barrels was expected.
Egypt
declared a month-long national state of emergency on Wednesday,
following deadly clashes between police and supporters of ousted
President Mohamed Morsi. Local news reported Morsi would be held in
detention for another 30 days, which could further fan protest
movements.
“Investors
can’t ignore such a situation, as in the race for power the Suez
Canal will be a weighty asset, the ownership of which will give a
chance to one of the parties to come to terms with the outside. This
is exactly the background against which oil prices are growing,”
Aleksey Pukhaev wrote in an e-mail.
When
Morsi was overthrown in July, WTI prices surged 8.8 percent.
The
Canal
Traders
are most concerned turmoil in Egypt could escalate to a level where
protesters could feasibly disrupt oil and commodity shipping through
the Suez Canal, situated about 125 kilometers east of Cairo.
“Disruptions
at the Suez Canal are unlikely, but markets never move on what’s
likely. They move on fear. If people are fearful about supply, they
buy even if the market is fundamentally well supplied,” said
Hewson.
A
crucial trade route, the canal handles 800,000 barrels of crude a
day.
“If
there is any disruption or if the violence results in the shutting
down of the canal, the impact will be quite severe," said Carl
Larry, president of Houston-based consultancy Oil Outlook and
Opinions.
Egypt’s
military has made safeguarding the Suez Canal and the
Suez-Mediterranean Pipeline from protesters a priority.
Egypt
itself doesn’t produce oil, but many of its North African neighbors
depend on the trade route as an export means, and if it closes, it
would create a bottleneck for main trading routes, which would send
fear into the oil investing market.
Middle
East and North African countries account for 36 percent of global oil
production.
By
EIA estimates, a combined 4.51 million barrels of crude and refined
products passed through Egypt’s gateway in 2012.
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