Published : Feb. 1, 2011 - 17:38
Market fears unrest could disrupt flow of oil from the Middle East
NEW YORK (AP) ― A key global oil price contract topped $100 per barrel on Monday for the first time since 2008, as investors kept an anxious eye on Egypt and worried about unrest there disrupting the flow of oil from the Middle East.
While Egypt is not a major oil-producing country, each day about two million barrels of oil pass through the Suez Canal and an adjacent pipeline, both of which are controlled by Egypt. The Suez remains open and shipping has not been interrupted.
“Those watching it closely do not believe it is terribly likely to happen soon or at all, but recognize the possibility that it could occur,” energy consultant Cameron Hanover said.
The larger concern is that the unrest in Egypt, which follows upheaval in Yemen and Tunisia, could spread to more important oil producing regions like Saudi Arabia. Egypt is by far the most populous nation in the Arab world.
Traders of crude oil and natural gas during early trading at the New York Mercantile Exchange on Monday. (AP-Yonhap News)
“Given how important a role Egypt plays in the Arab world and in the Middle East, the unrest adds a new level of anxiety to the oil market,” says James Burkhard, Managing Director for Global Oil at the analysis firm IHS CERA.
The price of Brent crude rose $1.59 to settle at $101.01 a barrel on the ICE Futures exchange in London. Brent is used to price oil in Asia, where demand is growing fast, and in Europe, where a cold winter is leading to high demand for heating oil.
The price of U.S. benchmark West Texas Intermediate, or WTI, rose $2.85, or 3.2 percent, to settle at $92.19 a barrel on the New York Mercantile Exchange. That marks a two-session gain of about 8 percent.
Brent crude has been trading far above WTI for months. Oil supplies at Cushing, Oklahoma, where the U.S. benchmark is priced, have been rising, keeping its price below Brent.
Both Brent and WTI prices climbed in recent months as growing economies around the world have pushed demand to record levels. Prices had fallen back somewhat because of investor concerns that high inflation in China would temper economic growth there. Also, Saudi Arabia’s oil minister implied that OPEC nations were ready to raise production to bring down prices.
Oil prices have been on the rise since anti-government rioting began in Egypt at the end of last week. On Monday, oil prices were also pushed higher by positive economic news in the U.S. And a rising stock market fueled speculation that demand for oil and gas in the U.S. would pick up.
The Commerce Department said that consumer spending rose sharply in December, and purchases for the whole year increased at the fastest pace in three years.
Exxon Mobil reported its most profitable quarter since the third quarter of 2008, and its shares rose 2.1 percent to $80.68. Shares in Chevron, BP, ConocoPhillips and Royal Dutch Shell all rose between one percent and three percent.
Apache Corp., based in Houston, saw its shares drop 7 percent late last week amid fears the unrest would disrupt its large operations in Egypt. The company says its operations remain unaffected. Shares rose $4.52, or 3.9 percent, to $119.36.
In other energy trading on the Nymex, heating oil added 4.61 cents to settle at $2.7403 a gallon, gasoline futures picked up 1.42 cents to settle at $2.5001 a gallon and natural gas gained 9.7 cents to settle at $4.420 per 1,000 cubic feet.