Oil price nears $100 on Egypt crisis
World oil prices rose to within a whisker of $100 a barrel Monday on fears that violent unrest in Egypt could disrupt the flow of oil through the Suez Canal on its way to the West, analysts said. Brent North Sea crude for delivery in March struck $99.97 a barrel in Asian deals. Crude last hit $100 dollars in October, 2008. In later London trade, it pulled back to stand at $99.20, down 22 cents compared with the close on Friday.
Oil Prices Rise as Egypt Unrest Gooses Market
There is no immediate threat to oil supplies at this time. The Suez Canal and Sumed Pipeline — which combined carry over 2 million barrels of oil a day — are operating normally right now. Egyptian oil output currently stands at under 700,000 barrels a day. Even combined with production in other areas where there have been protests — Tunisia, Yemen, and Jordan — their total output is about one-tenth that of Saudi Arabia, the region’s top oil producer. OPEC has plenty of spare capacity (about 5.8 million barrels a day) — and the International Energy Agency could even consider releasing strategic reserves if needed — to meet a supply disruption. But a disruption in supply may not be the major catalyst for a big move in the price of oil. The main risk is not actual disruption of oil flows from Egypt, says Lawrence Eagles, head of commodity research at J.P Morgan. “It’s the potential for these events to act as a catalyst to unrest in countries that are otherwise seen as stable,” Eagles says. Uncertainty about the spread of the unrest could send oil prices significantly higher early this week.
Egypt riots and Oil
Nearly 3 million barrels of oil transit daily through the Suez Canal, as much as Canada’s daily output, making it one of the world’s most important oil routes. The tankers ferrying this oil are coming from Saudi Arabia, Kuwait and neighbouring producers and are for the most part headed to US shores and to a lesser extent Western Europe which also relies on the North Sea and Russia for its oil supply. Unfortunately Egypt is the country which controls the Suez Canal and as the food riots gradually take the shape of a revolution, the future of the Canal becomes a million dollar question. As it stands, the possibilities are endless, among which here are some likely scenario to ponder:
* A labor strike may cause a temporary transit disruption through the canal. Not good news for Egyptians as the food Egypt imports also comes through the canal.
* For a newly established government eager to prove its legitimacy, the most populist thing to do would be to significantly raise the Canal’s Tariff: The tax levied by Egypt on all oil flowing through the canal. This would be in effect a tax on non-Egyptian oil to subsidize Egyptian food. As a result oil prices would soar worldwide.
Oil companies evacuate Egypt staff; oil prices retreat
International oil companies have evacuated foreign personnel from Egypt over concerns for their safety amid the past week’s sometimes violent anti-governments protests, although initial worries about disruption to oil shipping through the Suez Canal seem unfounded so far… The potential impact of escalating political instability in Egypt would likely come from labor strikes shutting down operations at the Suez Canal or the Sumed pipeline rather than in the form of any organized paramilitary attacks on the two oil transit routes, Societe Generale said in a research report Saturday.
Opec ready to act on supplies amid Egypt turmoil
OPEC stands ready to increase oil production if the Egypt crisis cuts the flow of crucial supplies through the Suez Canal to the West, its secretary-general Abdalla Salem El-Badri indicated on Monday. El-Badri, head of the Organization of Petroleum Exporting Countries (Opec), warned that ‘there could be a real shortage’ of crude oil passing through the Suez.
OPEC worried about Egypt, but not acting yet
Oil producer group OPEC said on Monday it was worried about the unrest in Egypt but saw no reason to boost output to cool prices at the moment and would add more supply only if it saw a shortage in the market.
Oil Future: Crude Up On Egypt Unrest; No Supply Disruption Yet
“This affects the U.S. more so (than other countries), and that’s why we’re seeing more of a run-up in the U.S. WTI–at least temporarily,” Carl Larry, president of Oil Outlooks & Opinions, said from Houston. “The North Sea can still produce for Europe, and Middle Eastern and Russian crude can still cover Asia, but the U.S. is stuck.”
Egypt’s troubles look likely to give us all a new ‘oil shock’
The Independent/Jan 31
Whatever the purely political impact of the unrest in Egypt proves to be, it is pretty much the last thing a fragile world economy needs now. It will trigger more inflation, higher interest rates to tame it, falls in stock markets and a further hit to standards of living. The effect on China, in particular, could be especially dramatic, as the country has such an insatiable appetite for fossil fuels.
Pickens’ Take on Egypt & Oil
CNBC Video/Jan 30
“This thing, it could be huge… I don’t know how far reaching this is… this clearly shows us, the United States, we have to have an energy plan in America. We have no energy plan.”