LONDON—Oil prices firmed on fears that growing unrest across the Middle East and North Africa could pose a risk to oil supplies.
Lower-than-expected official inflation figures from China also helped reduce concerns that country would take drastic steps to slow its economy, which would cut oil demand.
Brent crude for April delivery recently was up 30 cents, or 0.3%, at $103.38 a barrel on London's ICE Futures exchange and touched a two-year high of $104.04 a barrel. Light, sweet crude futures for March delivery were up 43 cents, or 0.5%, to $85.24 a barrel on the New York Mercantile Exchange.
Protests have spread throughout the Middle East this week, helping to reverse a slide in oil prices after Egyptian President Hosni Mubarak's resignation on Friday after more than two weeks of anti-government protests.
The oil market remains anxious that instability could disrupt oil shipments through the Suez Canal or Sumed pipeline, which both run through Egypt. Now, Algeria, Iran and Yemen, all oil exporters, are seeing growing unrest as well. Iran is the world's fourth-largest crude oil exporter, and produced 3.695 million barrels a day of crude oil in January this year, according to a Dow Jones Newswires survey.
"If the demonstrations in these countries escalate, we could see an effect on export and production of crude oil, especially from Iran," said Thina M. Saltvedt, a senior oil analyst from Nordea Bank. "As long as these protests continue Brent will stay high."
Analysts say the protests are affecting Brent more than Nymex futures, known as West Texas Intermediate, or WTI. Prices for the latter are being held down by high inventories at the contract's delivery point in Cushing, Okla.
With Brent pushing new two-year highs, the spread between the front month contracts in each market has topped $18 a barrel, a record.
"Brent has become a better proxy to the protests in the Middle East while the WTI price is still influenced by the high level of inventories at Cushing," said Marius Paun from London Capital Group. "Things could get complicated for the energy sector in the immediate future as geopolitical tensions in the oil rich Middle East is usually a very sensitive issue."
Both contracts also saw support Tuesday after China reported lower-than-expected inflation in January, though concerns remain that the Chinese government could continue to hike interest rates to slow the economy. That would likely reduce the rate of growth in oil demand from China, the world's second-biggest oil consumer after the U.S.
China's consumer price index rose by 4.9% in January from a year earlier, below the 5.4% average forecast from economists in a Dow Jones survey.
The ICE's gasoil contract for March was trading down $2.75 at $868.75 a metric ton, while Nymex gasoline for March delivery was up 1.42 cents, or 0.6%, at $2.5316 a gallon.
