Oil surged to the highest price in more than two years in New York and Brent crude topped $100 a barrel as a seventh day of unrest in Egypt raised concern that supplies may be disrupted.
Oil capped a five-month increase as opposition groups demanding President Hosni Mubarak’s ouster urged more people onto the streets. Egypt’s Suez Canal, which links the Mediterranean and Red seas, is one of seven “world oil transit chokepoints,” according to the U.S. Energy Department.
“This is all Egypt,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “Upwards of 3 to 4 million barrels a day of flow could be disrupted” by a shutdown of the Suez Canal. That would add 6,000 miles (9,700 kilometers), two weeks and assorted costs to tankers’ journeys from the Persian Gulf to Europe and the U.S., he said.
Oil for March delivery climbed $2.85 or 3.2 percent, to $92.19 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 3, 2008. Futures rose 0.9 percent in January and 26 percent in the past year.
Brent for March settlement gained $1.59, or 1.6 percent, to $101.01 a barrel on the ICE Futures Europe exchange in London, the highest settlement since Sept. 26, 2008. It touched $101.73 on an intraday basis.
“Momentum is key,” said Matt Smith, a commodities analyst for Summit Energy in Louisville, Kentucky. New York futures are “trying to keep up with Brent.”
Brent’s premium to New York crude narrowed to a one-week low of $8.82 a barrel. It surged to record of more than $11 a barrel on Jan. 27.
About 2.5 percent of global oil production is shipped through Egypt via the Suez Canal and the adjacent Suez-Mediterranean Pipeline, according to a Goldman Sachs Group Inc. report today. The canal has the capacity to handle 2.2 million barrels of oil a day while that of the Sumed oil pipeline is 2.3 million barrels a day, Goldman said.
Ships are passing normally through the canal, which is handling 45 to 50 vessels a day, said Ahmed El Manakhly, the head of traffic for the Suez Canal Authority, the waterway’s operator. He called the volume “normal.”
The Organization of Petroleum Exporting Countries would increase output if current unrest in Egypt disrupts supplies of crude from the Middle East, Secretary-General Abdalla el-Badri said in London.
“If we see a real shortage we will have to add,” he said. OPEC would act if supply was reduced by one million barrels a day or more, he said.
Oil also increased as consumer spending in the U.S., the world’s biggest oil user, had its strongest quarter in more than four years in December.
Purchases, which account for about 70 percent of the economy, rose 0.7 percent in December, from 0.3 percent the prior month, Commerce Department figures showed today in Washington. The December figure topped the 0.5 percent median estimate of 67 economists in a Bloomberg News survey.
Businesses in the U.S. also expanded in January at the fastest pace since July 1988, indicating the world’s largest economy has momentum at the start of the year, according to the Institute for Supply Management-Chicago Inc.’s business barometer.
The measure rose this month to 68.8 from 66.8 in December. Figures greater than 50 signal expansion, and economists projected the gauge would slip to 64.5, based on the median estimate in a Bloomberg survey.
“It’s a question now of how Egypt plays out and how the economic data plays out,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
Protests in Egypt are unlikely to spread to major oil-producing parts of the Middle East, including the six-nation Gulf Cooperation Council, whose members include OPEC producers Saudi Arabia, the United Arab Emirates, Kuwait and Qatar, Goldman Sachs said.
“The more affluent GCC countries are much less likely to have problems than the less affluent North African countries,” Goldman analysts led by Jeffrey Currie in London said in a report today. “Even if the problems spread to one of these countries, it is not necessarily the case that energy supplies would be disrupted, as history has shown that energy can still flow even under very adverse political conditions.”
Saudi Arabia is the world’s largest crude-oil exporter.
Al-Naimi on Price
Saudi Arabian Oil Minister Ali Al-Naimi said in Geneva today that oil prices at $70 to $80 a barrel are “appropriate,” adding that he’s confident oil-market supply and demand are “relatively balanced.”
Crude futures in New York have traded above $80 for more than three months.
Oil volume in electronic trading on the Nymex was 919,795 contracts as of 3:29 p.m. in New York. Volume totaled a record 1.47 million contracts Jan. 28. That’s more than double the average of the past three months. The previous record, set April 13, was 1.42 million contracts. Open interest was 1.51 million contracts.