Oil Rises for First Day in Three in London on Egypt, EquitiesGrant Smith
Oil rose in London for the first time in three days on concern that political upheaval in Egypt remains unresolved and may threaten supplies of crude from the Middle East.
North Sea Brent traded around $100 a barrel, extending its premium over futures in New York to the widest in three days. Hedge funds had raised bullish bets on oil by the most in eight weeks on concern the unrest would spread. Oil recouped earlier losses today as equities climbed for a fourth day in Europe on growing signs of economic recovery.
“The risk of contagion will keep prices above $100 a barrel for a while,” said Christopher Bellew, senior broker with Bache Commodities Ltd. in London. “Much has still to be settled in Egypt, so there is still the specter of unrest spreading to oil-producing countries.”
Brent crude for March settlement climbed as much as $1.07, or 1.1 percent, to $100.90 a barrel on the London-based ICE Futures Europe exchange. It traded for $100.47 a barrel as of 1:01 p.m. local time. On Feb. 4 it slid 1.9 percent to end at $99.83. On the New York Mercantile Exchange the March contract was up 22 cents at $89.25 a barrel. Nymex futures settled at $89.03 on Feb. 4, the lowest since Jan. 27, and are up 24 percent in the past year.
European equities climbed to their highest levels since September 2008 and U.S. stock futures advanced as investors bet that the recovery in the global economy is strengthening. New York futures earlier fell as much as 0.6 percent after Egyptian Vice President Omar Suleiman and some members of the opposition agreed yesterday on steps to resolve the crisis.
Egyptian banks opened yesterday for the first time in more than a week and courts resumed hearings, state television said. The country is repairing a natural-gas pipeline network in the Sinai Desert after an explosion forced a halt in exports to Israel and Arab countries, the state news agency reported.
As many as 300 people have died since clashes started Jan. 25, according to the United Nations. Oil in New York rose as high as $92.84 a barrel during the turmoil, the most since Oct. 7, 2008. Brent surged above $100.
Middle East and North African countries produce 36 percent of global oil and have 61 percent of proven reserves, according to BP Plc’s Statistical Review of World Energy.
Hedge funds and other large speculators increased net-long positions, or wagers on rising prices by 17 percent, in the seven days ended Feb. 1, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the largest gain since the week ended Dec. 7.
Egypt’s Suleiman met yesterday with the Wafd and Tagammu parties, Muslim Brotherhood and billionaire Naguib Sawiris. The negotiators agreed to set up a committee that will recommend by the first week of March constitutional changes needed for free and fair elections, Suleiman said in a statement.
Brent’s premium to West Texas Intermediate, the crude grade traded in New York, widened to $11.22 a barrel today from $10.80 at the end of last week. The spread averaged 76 cents last year.
WTI’s discount may narrow as the political crisis in Egypt abates, according to Cubit’s Keenan.
“The reason the spread blew out in the first place was because of the preference of Brent as a global benchmark over WTI for people to express any geopolitical hedges,” said Keenan. “If we do see the Egypt situation resolving itself, I think we will get a narrowing of that WTI-Brent spread.”
About 3.5 percent of global oil output moves through Egypt via the Suez Canal and the Suez-Mediterranean Pipeline, according to Bloomberg calculations using data from the Energy Department.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.