By Mark Shenk Feb. 2 (Bloomberg) -- Crude oil surged, approaching its highest price in more than two years, on concern that protests in Egypt may threaten exports from the Middle East. Futures climbed as much as 1.1 percent after clashes broke out today in central Cairo’s Tahrir Square between anti- government protesters and people loyal to President Hosni Mubarak. Political turmoil is spreading throughout the Middle East, helping send Brent crude above $100 a barrel this week. “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.” Crude oil for March delivery rose $1.01, 1.1 percent, to $91.78 a barrel at 10:09 a.m. on the New York Mercantile Exchange. The contract touched $92.84 a barrel on Jan. 31, the highest intraday price since Oct. 7, 2008. Oil dropped to $90.40 and advanced to $91.78 today. Brent crude oil for March settlement increased 30 cents, or 0.3 percent, to $102.04 a barrel on the London-based ICE Futures Europe exchange. It reached $102.18, the highest level since Sept. 29, 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 U.S. President Barack Obama told Mubarak that transition to democracy must “begin now.” ‘Geopolitical Risk Premium’ “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.” 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. OPEC Output OPEC may increase oil production as declining inventories and unrest in the Middle East push prices to the highest levels since 2008, BP Plc Chief Economist Christof Ruehl said. The oil market is “tightening” as economic growth this year is expected to boost demand further, Ruehl said in a Bloomberg television interview from Moscow. If the Organization of Petroleum Exporting Countries keeps output at current levels, “that would translate into a price increase all on its own, without the Egyptian situation,” he said. A U.S. Energy Department report today may show inventories climbed by 2.5 million barrels, according to the median of 15 analyst estimates in a Bloomberg News survey. The department is scheduled to release the report at 10:30 a.m. in Washington. --With assistance from Grant Smith in London. Editors: Joe Link, Bill Banker To contact the reporters on this story: Mark Shenk in New York at mshenk1@bloomberg.net. To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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