Energy Services
Client Login01924 267406sales@energy-services.co.uk
Connect with us Follow us on Twitter Call us
Blog Header
Save Money

Procurement

Save Time

Intelligence

More Information

Clear Analysis

More Control

Management

  • February 1st, 2011

Crude Rally Ends on Signs of Reduced Risk From Egyptian Unrest

Oil dropped from a two-year high as concerns eased that supplies through the Suez Canal may be disrupted by unrest in Egypt. Brent crude traded above $100 a barrel for a second day.

Futures trimmed two-day gains after Suez Canal officials said traffic is moving normally through the main artery for more than 2.2 million barrels of oil a day. A U.S. government report tomorrow may show stockpiles grew for a third week, according to a Bloomberg News survey.

“So far the escalating violence in Suez has seen no specific targeting of shipping facilities or passing ships,” Andrey Kryuchenkov, a London-based analyst at VTB Capital, said in a note. “We still see little threat to major producing nations, with the exception of Algeria, where we had some unrest earlier this month.”

Oil for March delivery on the New York Mercantile Exchange dropped as much as 84 cents, or 0.9 percent, to $91.35 a barrel and was at $91.45 a barrel at 10:40 a.m. London time. Yesterday, it rose to $92.19, the highest settlement since Oct. 3, 2008. Futures have gained 0.9 percent in January. Brent for March settlement fell as much as 73 cents, or 0.7 percent, to $100.28 a barrel on the ICE Futures Europe exchange in London. It rose to $101.73 yesterday, the highest price since Sept. 29, 2008.

Egypt Unrest

Futures in New York rose 3.2 percent yesterday as opposition groups demanding Egyptian President Hosni Mubarak’s ouster urged more people onto the streets. About 2.5 percent of global oil output moves through Egypt via the Suez Canal and the adjacent Suez-Mediterranean Pipeline, according to Goldman Sachs Group Inc.

Ships are passing normally through the waterway, which is handling 45 to 50 vessels a day, said Ahmed El Manakhly, the head of traffic for the Suez Canal Authority.

Egypt deployed troops to help protect the SuMed, while the facility’s pipeline’s guards doubled their number of sentry posts, an official said today. Mubarak has meanwhile offered to negotiate with an opposition movement that plans to force him out of office.

“By the looks of it, the army is not going to attack the people, which removes the risk premium in the market,” Kryuchenkov at VTB said by phone.

The Organization of Petroleum Exporting Countries would increase output if the unrest in Egypt disrupts supplies from the Middle East, Secretary-General Abdalla el-Badri said in London yesterday. Crude prices at $70 to $80 a barrel are “appropriate,” Saudi Arabian Oil Minister Ali al-Naimi said at a conference in Geneva yesterday.

High Inventories

“A lot of producing countries like OPEC are saying every day that a lot of crude oil is available, there is no shortage,” said Ken Hasegawa, a commodity derivative sales manager at broker Newedge in Tokyo. “WTI is very weak because of high inventories.”

An Energy Department report tomorrow may show that U.S. crude inventories climbed by 2.5 million barrels last week from 340.6 million, according to the median of 11 analyst estimates in a Bloomberg News survey. The industry-funded American Petroleum Institute will report its own data today.

“The premium of Brent over WTI futures was at $8.95 a barrel at 10:44 a.m. in London after surging to $11.75 a barrel on Jan. 27. The spread may eventually stabilize at $8 to $10 a barrel”, Hasegawa said.

Source: Bloomberg

All Categories

News Archive