BLBG: Crude Oil Advances in New York After Mubarak Speaks, Refuses to Resign
Oil rose as Egyptian President Hosni Mubarak defied calls for his resignation, stoking speculation that renewed turmoil may disrupt crude supplies through the North African country.
Futures climbed as much as 1.2 percent in New York after Mubarak reiterated late yesterday he intends to stay on as president until elections in September, while handing some powers to Vice President Omar Suleiman in a bid to placate opponents. Prices reached a two-year high last week on concern the unrest may curb oil flows through Egypt’s Suez Canal and spread to other oil-producing nations in the Middle East.
“The greatest danger is the possible contagion in the region, with the risk of some major oil producers becoming involved,” said Eugen Weinberg, head of commodities research at Commerzbank AG in London.
The March contract on the New York Mercantile Exchange gained as much as $1.04 to $87.77 a barrel and was at $87.43 at 9:40 a.m. London time. Prices are down 1.6 percent this week and 16 percent higher than a year ago. Brent crude for March settlement climbed 97 cents, or 1 percent, to $101.84 a barrel on the ICE Futures Europe exchange in London.
The gain in New York futures outpaced London’s Brent crude, narrowing the spread between the contracts from a record. Brent’s premium to West Texas Intermediate was at $14.03 a barrel, compared with an all-time high based on closing prices of $15.11 on Feb. 9, according to data compiled by Bloomberg. The gap averaged 76 cents last year.
Iran 1979
Protests in Egypt, inspired by the popular revolt that ousted Tunisian President Zine El Abidine Ben Ali on Jan. 14, sparked concern of further upheaval in a region that holds more than 50 percent of the world’s known oil reserves.
Oil more than doubled in 1979 when the regime of Iran’s Shah Mohammed Reza Pahlavi was toppled, slashing the nation’s crude exports. Iran is the Organization of Petroleum Exporting Countries second-largest producer, after Saudi Arabia.
“What we don’t know is if this is 1979 Iran all over again or if it’s completely different,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.
About 3.5 percent of global crude output moves through Egypt via the Suez Canal and the Suez-Mediterranean Pipeline, according to Bloomberg calculations using data from the U.S. Energy Department.
Oil in New York settled at $92.19 a barrel on Jan. 31, the highest price since October 2008. The Suez Canal, which links the Mediterranean and Red seas, is one of seven “world oil transit chokepoints,” according to the U.S. Energy Department.
The International Energy Agency and OPEC said in reports yesterday that if unrest in Egypt halts oil shipments through the canal, flows can be diverted through the SuMed pipeline and other export routes.
To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net Grant Smith in London at gsmith52@bloomberg.net
To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net
