BLBG: Oil Near 10-Week Low as Mubarak Resignation Eases Supply Concern
Oil traded near the lowest in more than 10 weeks after Egyptian President Hosni Mubarak stepped down, reducing concern that civil unrest will disrupt crude shipments from the Middle East.
Futures dropped as much as 0.4 percent after Egypt’s ruling army council said it aims to hand power to a democratically elected government within six months following Mubarak’s resignation Feb. 11. The market is well supplied, United Arab Emirates Oil Minister Mohamed Al-Hamli said today. Brent prices gained as North Sea oil-field glitches reduced output.
“The market will now focus its thinking away from Egypt,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. “It’s back to inventories and the economic numbers this week.”
Crude for March delivery was at $85.68 a barrel, up 10 cents, in electronic trading on the New York Mercantile Exchange at 1:38 p.m. Singapore time. The contract closed at $85.58 on Feb. 11, the lowest since Nov. 30. Prices slid 3.9 percent last week and are 15 percent higher than a year ago.
Brent crude for April settlement climbed 68 cents, or 0.7 percent, to $101.62 a barrel on the ICE Futures Europe exchange in London. The contract rose 0.7 percent last week. March futures expired on Feb. 11, up 0.6 percent at $101.43.
Brent Support
Brent has outpaced New York futures, widening the difference between the prices to a record, as unplanned outages cut European supplies. Production from the North Sea has been reduced by 2 percent, according to data compiled by Bloomberg.
“There have been output issues in the North Sea that have continued to linger,” said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. “Certainly the concerns about supply disruptions in Egypt have eased. The fear of contagion to other countries will keep crude supported.”
Crude rose to a two-year high last month on speculation supplies through Egypt may be interrupted and disturbances may spread to oil-producing countries in the Middle East.
Egypt’s ruling army council yesterday dissolved parliament and suspended the constitution following the ouster of President Mubarak, saying it will rule for six months or until general elections take place.
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 U.S. Energy Department.
U.S. crude stockpiles rose for a fourth week in the seven days ending Feb. 4, an Energy Department report last week showed. Gasoline supplies advanced to the highest level since March 1990, according to the data.
Cushing Supplies
The price of prompt delivered oil in New York has dropped compared with later-dated supplies amid a build-up in inventories at Cushing, Oklahoma, the delivery point for futures contracts. March crude is trading at a discount of $3.69 a barrel to the April contract, a market structure known as a contango. That is the most since May 14.
Supplies at Cushing swelled to a record 38.3 million barrels at the end of January, according to the Energy Department. They shrank in the week ended Feb. 4. More crude will begin flowing to the hub following the start up this month of TransCanada Corp.’s Keystone pipeline extension that will carry 150,000 barrels a day to the delivery point.
The 36-inch extension is the second phase of the $12 billion Keystone pipeline project. The first phase started service in mid-2010 with a capacity of 435,000 barrels a day.
An expansion to the U.S. Gulf Coast, the third part of the project, known as Keystone XL, may be operational by early 2013 if regulatory approvals are completed. The extension will run from Cushing to Texas, linking refineries on the U.S. Gulf Coast to Canada’s oil sands.
Net-Long Positions
Concerns about the buildup of New York-traded West Texas Intermediate oil supplies led hedge funds and other money managers to leave the amount of bullish bets little changed for crude last week.
Net-long positions in oil increased by 442 futures and options combined, or 0.2 percent, to 202,383 in the seven days ended Feb. 8, according to data from the Commodity Futures Trading Commission’s Commitment of Traders report.
Long, or bullish, bets on gasoline fell 8.3 percent to 59,913 futures and options combined, the CFTC data showed. Net- long bets on heating oil declined by 2.4 percent to 36,443.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Christian Schmollinger in Singapore at christian.s@bloomberg.net
To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net
