Crude edged up in New York and Brent oil climbed to a 28-month high amid concern that protests in Egypt may threaten exports from the Middle East.
Futures rose 9 cents in New York after clashes broke out in Cairo’s Tahrir Square between anti-government protesters and people loyal to President Hosni Mubarak. Prices retreated after an Energy Department report today showed that U.S. crude-oil and gasoline supplies increased more than forecast last week.
“Everyone is watching television and the market is moving on the most recent pictures from Egypt,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “The price of crude will trend higher until we get some kind of resolution to the crisis.”
Crude oil for March delivery settled at $90.86 a barrel on the New York Mercantile Exchange. It climbed as much as 1.1 percent earlier today. The contract touched $92.84 on Jan. 31, the highest intraday price since Oct. 7, 2008. Futures are up 18 percent from a year ago.
Brent crude oil for March settlement increased 60 cents, or 0.6 percent, to end the session at $102.34 a barrel on the London-based ICE Futures Europe exchange. It was the highest settlement price since Sept. 26, 2008.
Mubarak said yesterday that he won’t stand down until elections in September. The Egyptian army said protesters should return to their homes, in a statement by a military spokesman on state television. It came hours after President Barack Obama said the transition to democracy must “begin now.”
“We’re going to test the recent highs and continue to move higher as long as the unrest continues,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York.
About 2.5 percent of global oil production moves through Egypt via the Suez Canal and the adjacent Suez-Mediterranean Pipeline, according to Goldman Sachs Group Inc. The waterway carries more than 2.2 million barrels of oil a day.
There is “no real threat” to flows through the canal, Fatih Birol, chief economist at the International Energy Agency, said today in a Bloomberg interview in Moscow. “We hope to see the market calm down because it is not good news for anybody in the market: consumers, producers or anybody.”
Crude capped the biggest two-day rally since May on Jan. 31 on concern the unrest in North Africa will spread to crude-producing countries in the Middle East. Jordan announced a change of government yesterday following protests last week. Prime Minister Samir Rifai resigned and King Abdullah asked Marouf Bakhit to form a new government.
“The market is rising because the situation in Egypt doesn’t appear to be settling down,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “It looks like the unrest will continue and possibly spread in the surrounding region.”
The oil market is “tightening” as economic growth this year is expected to boost demand further, BP Plc Chief Economist Christof Ruehl said on a Bloomberg television interview from Moscow. The Organization of Petroleum Exporting Countries may increase oil production as prices climb further, he said.
“The chief reason for oil’s rally through $100 is the return of the geopolitical risk premium,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. “There has been a fresh inflow of speculative positions, though with stocks and spare production capacity ample, conditions don’t suggest a surge to new records.”
Crude oil supplies increased by 2.59 million barrels to 343.2 million in the week ended Jan. 28, the Energy Department said. Stockpiles were forecast to advance by 2.5 million barrels, according to the median of 15 analyst estimates in a Bloomberg News survey.
Inventories at Cushing, Oklahoma, the delivery point for New York-traded West Texas Intermediate oil, increased 667,000 barrels to 38.3 million, the highest level since the department started keeping records at the storage hub in 2004.
The premium of Brent oil to WTI has grown as supplies at Cushing have increased. It surged to a record of $11.75 a barrel on Jan. 27. The European benchmark was $11.48 higher today.
Gasoline stockpiles rose 6.15 million barrels to 236.2 million, the highest level since March 1993, the report showed. It was the biggest gain since January 2009. Analysts projected that supplies would climb 2 million barrels.
“External events are a lot more important than domestic inventories at the moment,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “The risk to the Suez-Mediterranean pipeline and that unrest will spill to other countries outweigh today’s inventory report.”
Oil volume on the Nymex was 738,836 contracts as of 3:46 p.m. in electronic trading in New York. Volume totaled 919,766 contracts yesterday, 31 percent higher than the average of the past three months. Open interest was 1.53 million contracts, the highest level since Nov. 12, 2007.