Brent stays above $100 on Egypt upheaval
Singapore, February 1, 2011
Brent crude stayed above $100 a barrel on Tuesday after jumping more than 1 percent the previous day on unrest in Egypt and rising demand expectations.
Brent crude for March slid 50 cents to $100.51 a barrel at 0302 GMT, after topping $100 for the first time since October 2008 on Monday, when prices touched an intraday high of $101.73. US crude shed 25 cents to $91.94.
China's factory growth slowed to a five-month low, signalling demand may not rise as quickly in the world's second-largest oil user.
Monetary tightening to contain inflation caused China's purchasing managers' index (PMI), an indicator for factory activity, to fall to a lower-than-expected 52.9 in January from 53.9 in December, official data showed.
'$100 is not a final target' for Brent, said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd. '$110 and $115 could be reached by the end of the year.
People now have to take geopolitics into consideration. Even if nothing happens in Egypt, it allows investors to take on additional risk and develop long positions in the hope of making more money.'
At the moment, Egypt's unrest poses no direct threat to ships passing through the strategic Suez Canal, connecting the Red Sea with the Mediterranean, a senior official with London's marine insurance market said on Monday.
'While the current tensions have raised some concerns about an eventual impact on logistics, we note that physical oil supply has not been affected,' Credit Suisse analysts including Stefan Graber said.
'While short-term risks remain skewed to the upside, we think that the current price strength is likely to ease once the situation in Egypt normalises. Spare Opec production capacity remains ample, which should prevent a rapid tightening of the market balance.'
The Organization of the Petroleum Exporting Countries says it holds about 6 million barrels per day (bpd) of idle production capacity -- equal to 7 percent of world demand -- that it could tap to fill any shortage. Most of this capacity is held by Saudi Arabia. - Reuters