SF: Oil Near 10-Week Low as Mubarak Resignation Eases Supply Concern
Feb. 14 (Bloomberg) -- 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 0.5 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 and United Arab Emirates Oil Minister Mohamed Al-Hamli said today the market is well-supplied. Stockpiles at the distribution point for West Texas Intermediate in Cushing, Oklahoma, swelled to a record last month.
"Oil is more or less unchanged compared to last week," said Gerrit Zambo, a trader at Bayerische Landesbank in Munich. "After Mubarak stood down, you would expect oil to fall. And the situation of oversupply at Cushing is increasing the spread between WTI and Brent."
Crude for March delivery on the New York Mercantile Exchange was at $85.41 a barrel, down 17 cents, at 9:28 a.m. London 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 36 cents, or 0.4 percent, to $101.30 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.
North Sea Output
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 elections are held.
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 the Cushing delivery point for futures contracts. March crude is trading at a discount of $3.67 a barrel to the April contract, a market structure known as a contango. That is the most since May 13.
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.
Concerns about the buildup of New York-traded WTI 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.
