Brent rises above $102 on Egypt tension
Singapore, February 10, 2011
Brent crude rose above $102 on Thursday, supported by the ongoing tension in Egypt and tighter North Sea supplies, which contrasted with higher crude stockpile in the US, causing the spread between the benchmarks to stay wide.
ICE Brent hovered around $102.00 a barrel, while US crude for March edged up 9 cents to $86.80 a barrel at 0315 GMT. The spread between the two benchmarks were at $15.24 a barrel, down from a record high of $15.41 a barrel.
"When there are political reasons simmering in the background, people are always going to analyse that," said Ben Le Brun of CMC Markets based in Sydney, who added that possible or ongoing tension especially in the Middle East will cause oil prices to escalate.
Investors remained concerned that the unrest in Tunisia and Egypt could ignite similar protests in bigger oil producers such as Libya -- or even Saudi Arabia.
Egypt stays mired in political turmoil since Jan. 25.
The government of embattled Egyptian President Hosni Mubarak hit back on Wednesday at what it called US attempts to "impose" American will on a loyal Middle East ally, saying rapid reforms would be too risky.
But as pro-democracy protesters consolidated a new encampment around Cairo's parliament building, the White House again said that Egyptian ministers must do more to meet the demands of demonstrators, who want an immediate end to Mubarak's 30 years of one-man rule and sweeping legislative changes.
Four people were killed and several suffered gunshot wounds in clashes between security forces and some 3,000 protesters in a desert province far from Cairo on Tuesday and Wednesday.
It appeared to be the most serious such clash with official forces since Jan. 28, when police all but disappeared from Egyptian streets after they had beaten, tear gassed and fired on protesters.
Benchmark spreads to stay far apart
The spread between the two crude oil benchmarks will likely stay wide apart for some time as the tension in Egypt and tighter European supplies will drive Brent prices up at a much faster pace versus WTI.
"The spread between Brent and WTI is very huge at the moment, but this is due to the fact that there are more supplies in America versus Europe," said Le Brun.
Output from the four benchmark North Sea crude oil streams is due to fall in March to around 1.13 million barrels per day (bpd)from around 1.22 million bpd in February.
Brent, Forties, Oseberg and Ekofisk make up the North Sea BFOE crude oil benchmark, which is used to value around 20 million bpd of crude in the Atlantic basin, a figure equal to almost a quarter of daily world supply.
Ekofisk crude oil stream for instance is expected to load an average of around 337,000 barrels per day (bpd) in March, down from 373,000 bpd in February.
Oseberg crude oil stream will load around 135,000 barrels per day (bpd) in March, down from 150,000 bpd in February.
In contrast, domestic US crude stocks rose 1.9 million barrels to 345.06 million barrels in the week to Feb. 4 although imports fell 105,000 barrels a day to 8.88 million bpd.
Despite tighter North Sea supplies, analysts Reuters spoke to so far this week were not persuaded that the fundamentals could sustain the hike in crude oil prices.
"Brent is partially reliant on European economies," said Ben Westmore of National Australia Bank.
European shares edged lower from 29-month highs earlier this week, with a number of big stocks trading ex-dividend offsetting a wave of upbeat earnings news.
The pan-European FTSEurofirst 300 index of top shares was down 0.2 percent at 1,173.73 points.
Fundamentally, "Opec said they still have supplies that they can flood the market with, but they are quite happy with the prices they are seeing at the moment," said Le Brun.
Opec's secretary-general Abdullah Al-Badri told the Saudi-owned Asharq Al-Awsat newspapers on Wednesday that there is no need for Opec to hold an emergency meeting as the oil market is well supplied and the recent price rise is not related to any threat to supplies.
"The (state of the) oil market does not require holding an emergency meeting for Opec but of course we will remain vigilant of the market," he said. – Reuters