West Texas Intermediate crude rose for a fifth day, capping the longest stretch of gains since April, as unrest in Egypt bolstered concern that Middle East supplies may be cut. Brent oil climbed to a five-month high.
Futures advanced 0.4 percent in New York after Egypt declared a state of emergency and more than 500 people were killed as security forces broke up sit-ins. The country controls the Suez Canal, which is used by tankers carrying oil to Europe and North America from the Arabian Peninsula. WTI retreated and equities tumbled after falling U.S. jobless claims raised concern that the Federal Reserve will trim stimulus.
“Oil is rallying on the eruption of violence in Egypt,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “Equities are getting pounded, which is putting downward pressure on the market. WTI is caught between these opposing forces.”
WTI crude for September delivery increased 48 cents to $107.33 a barrel on the New York Mercantile Exchange. It was the highest settlement since Aug. 1. The volume of all futures traded was 2.4 percent above the 100-day average at 3:14 p.m.
Brent oil for September settlement, which expired today, rose 91 cents, or 0.8 percent, to $111.11 a barrel on the London-based ICE Futures Europe exchange, the highest close since March 7. The more-active October contract gained 78 cents at $109.60. Trading was 9.8 percent below the 100-day average.
The European benchmark crude traded at a $3.78 premium to WTI at today’s settlement, the widest at the close of trading since July 30.
WTI surged 8.8 percent in July, the most since August of last year, as Egypt’s army deposed Mohamed Mursi as president. Police yesterday charged into two Cairo squares occupied by Mursi supporters protesting his ouster. At least 525 people died, according to official tallies.
“Headlines of instability in Egypt, risks of spillover to other already-unstable countries in the region and fears of a blockage in the Suez Canal, however unlikely, could lend themselves to creating fear in the oil market,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.
Egypt controls the Suez Canal and the Suez-Mediterranean Pipeline, through which a combined 4.51 million barrels a day of crude and refined products were shipped between the Red Sea and the Mediterranean in 2012, according to the Energy Information Administration, the statistical arm of the U.S. Energy Department.
The Middle East accounted for 35 percent of global oil output in the first quarter of this year, International Energy Agency data show.
“Geopolitical risk is being priced into the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The upside should be limited because the military is in control now and isn’t going to allow anything to disrupt the shipment of oil through the canal.”
President Barack Obama said today that the U.S., which provides Egypt’s army with more than $1 billion a year under a decades-old alliance, will cancel joint military exercises scheduled for next month and consider further measures.
“The two most-recent highs are our next targets,” Yawger said. “WTI reached $108.82 on Aug. 2 and $109.32 on July 19. We’ll have to see if the bulls can take these out.”
Applications (INJCJC) for unemployment insurance payments fell by 15,000 to 320,000 in the week ended Aug. 10, the fewest since October 2007, a Labor Department report showed today in Washington. The median forecast of 44 economists surveyed by Bloomberg called for 335,000.
WTI has climbed 17 percent this year as the Fed maintained unprecedented monetary stimulus to bolster growth. Improving economic data bolsters speculation the central bank will curb its $85 million in monthly bond purchases.
U.S. equities declined as the employment data fueled stimulus speculation. The Standard & Poor’s 500 Index and the Dow Jones Industrial Average each slid 1.5 percent.
“The situation in Egypt is obviously very supportive for the market,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy. “The strong employment data today raises the prospect of the Fed tapering bond purchases. This would reduce the pool of easy money that’s gone into commodity markets.”
Commodities also climbed on a weaker dollar. The currency fell as much as 0.8 percent to $1.3363 per euro. A weaker U.S. currency increases the appeal of dollar-denominated commodities as an investment.
U.S. crude inventories slid by 2.81 million barrels last week to 360.5 million, the lowest level since January, the EIA said yesterday. Supplies at Cushing, Oklahoma, the delivery point for WTI futures, declined for a sixth week to 38.5 million, the least since March 2012.
Implied volatility for at-the-money WTI options expiring in October was 21.8 percent, unchanged from yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 570,094 contracts as of 3:14 p.m. It totaled 652,593 contracts yesterday, 0.4 percent above the three-month average. Open interest was 1.93 million contracts.
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