Oil advanced for a fifth day in London as protests in Egypt turned violent, prompting concern that crude supplies will be disrupted and unrest may spread to other parts of the Middle East.
North Sea Brent crude rose to a 28-month high of more than $103 a barrel after clashes broke out between anti-government protesters and supporters of President Hosni Mubarak in Cairo. About 2.5 percent of global oil production moves through Egypt via the Suez Canal and the Suez-Mediterranean Pipeline, according to Goldman Sachs Group Inc. Libyan oil official Shokri Ghanem said there’s no need yet for OPEC to raises output.
“All eyes in the oil market are on the riots and protests in Egypt right now,” said Robert Montefusco, senior broker at Sucden Financial in London. “That’s keeping prices strong, though there hasn’t been any disruption to supplies.”
Brent crude for March settlement rose as much as $1.03, or 1 percent, to $103.37 a barrel and was at $102.84 at 1 p.m. on the ICE Futures Europe exchange in London. It has gained 5.6 percent in the past five days, the longest rising streak since November, and closed yesterday at $102.34, the highest since Sept. 26, 2008.
On the New York Mercantile Exchange, oil for March delivery was up 79 cents at $91.65 a barrel after gaining as much as $1.19 to $92.05. The next-month contract has advanced 19 percent in the past year.
Brent’s 14-day relative strength index, a measure of how fast prices have risen or fallen, climbed to 70.3 today, the highest since Dec. 23, according to data compiled by Bloomberg. A reading of 70 or more can be taken as a sign that a market is “overbought” and ready to drop. New York crude’s RSI was 56.9.
There are “enough supplies” in the market, Shokri Ghanem, chairman of Libya’s National Oil Corp., said in a Bloomberg Television interview with Francine Lacqua today. Brent crude at about $100 a barrel is not a problem for the global economy, he said. The Organization of Petroleum Exporting Countries, which produces 40 percent of global output, next meets in June.
Brent’s premium to West Texas Intermediate, the crude grade traded in New York, was at $11.21 a barrel after widening to as much as $11.90 today. The spread averaged 76 cents last year.
“The Brent-WTI spread widened as concerns that unrest in Egypt could spread to other nations and temporarily disrupt oil supply to Europe and Asia, while stockpiles continue to grow in the U.S.,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd., said in a note today.
U.S. crude inventories increased by 2.59 million barrels to 343.2 million in the week ended Jan. 28, the Energy Department said yesterday. They were forecast to climb 2.5 million barrels, according to analysts in a Bloomberg News survey.
Mubarak said Feb. 1 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.”
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’s Prime Minister Samir Rifai resigned and King Abdullah asked Marouf Bakhit to form a new government. Protestors in Algeria have been killed in clashes with security forces.
“If the Egyptian situation results in the removal of the current administration quickly, then the consequences may be that other regions will follow,” Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, said by telephone today. “It could create a contagion that could see the Middle Eastern premium being brought back in a big way because you do have that risk to the Suez.”
Saudi Arabia, the United Arab Emirates and Kuwait, three of the Organization of Petroleum Exporting Countries’ biggest oil producers, are located on the Arabian Peninsula and haven’t experienced civil unrest.