Brent crude rose above $100 a barrel for the first time in 28 months on growing worries that protests in Egypt could disrupt oil shipments through the Suez Canal.
Brench mark crude oil for one month delivery shot up by $1.59 to close at $101.01 a barrel on Monday in London amid raucous trading scenes following the news of Egypt’s unfolding government and national paralysis.
Earlier in the day the same futures had come tantalisingly close in the Far East, nudging $99.97.
Discord on the streets of Cairo and talk of much larger, co-ordinated protests across the country this week spread fear in the City of London prompting oil to reach its highest price in 28 months. Current OPEC production levels and global stocks suggest that fundamentally there are no systemic reasons behind the spike, and analysts and traders alike are quickly pointing to fears over supply disruption to Europe and North America should oil tanker traffic lose safe passage through the Suez Canal.
The Egyptian controlled trade artery is one of two major regional choke-points for Gulf oil out of the region, the other, more serious threat being the senensitive Straits of Hormuz, a slim channel between Oman and Fujairah on the Arabian Peninsula, and Iran to its East.
Fear over stability throughout the MIddle East has traditionally resulted in a spike in the oil price, as traders each try to get a jump on what may become an upward price spiral should order not be restored.
To date, most estimates suggest that over 100 people have died in Egypt’s anti-presidential uprising, however anger has largey been directed at instruments of the state, as opposed to vital national infrastructure. Whilst flight disruption is ongoing in Cairo, this has been attributed to few staff either turning up, or many key workers being unable to get to the airport. Whilst passengers are currently stranded, no violence has been reported against them.
Gulf states have remained quiet on the Egyptian question, with the exception of Saudi Arabia, which has backed the president of three deacdes, Hosni Mubarak. News of the Saudi King’s continued support led to the sacking of a Saudi Arabian Airlines office in Cairo.
The price for one month future deliveries has risen considerably in recent months, having languished around $70 back in August, following a precipitous drop throughout the global recession from a record high of $147 in 2008.
OPEC ministers from around the Gulf, and the organisation itself have previously said $80 – $90 oil is both an acceptable price for exporters, and one which should sustain a global economic recovery.
Fears that any threats to oil supply or perceived threats to ruling elites could both propel oil to a price range well in excess of the psychologically important $100 barrier.
American commentators have said a sustained hike in oil prices would do considerable harm to any economic gains met last year, and risks derailing its own national recovery.
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