Brent oil tops $103 on Egypt violence
LONDON (Reuters) - Brent crude rose above $103 a barrel on Thursday after violent clashes in Egypt raised concern of supply disruptions and unrest across the Middle East, overshadowing ample supplies in top consumer the United States.
The crisis in Egypt has raised the prospect of disruption to supply of Middle East oil shipped through Egypt and of unrest spreading across the Middle East and North Africa, which combined produce more than a third of the world's oil supplies.
Brent crude for March rose as much as $1.03 to $103.37 a barrel, the highest intraday price since Sept. 26, 2008, and was up 31 cents at $102.65 at 1454 GMT. U.S. crude for March rose 31 cents to $91.17.
"Everybody is watching Egypt, we are looking at Yemen too," said Christophe Barret, oil analyst at Credit Agricole in London. "Mainly, it's fear of contagion to other countries.
"I think prices above $100 for Brent are just not sustainable, it's something that has a very strong impact on the economy, a strong impact on demand."
On Thursday, supporters of President Hosni Mubarak opened fire on protesters in Cairo's Tahrir Square, killing at least five people, in a fresh spike in violence over an unprecedented challenge to his 30-year-old rule.
In Yeman, tens of thousands squared off in peaceful protests for and against the government on Thursday during an opposition-led "Day of Rage", a day after President Ali Abdullah Saleh offered to step down in 2013.
U.S. crude held on to most of its gains after U.S. jobless claims fell more than expected last week and a separate government report showed non-farm productivity rose more than forecast.
Oil's rally has put pressure on the Organization of the Petroleum Exporting Countries to increase output.
OPEC has maintained supply is adequate and said it has no plan to meet before its next scheduled gathering in June.
Royal Dutch Shell Chief Executive Peter Voser said that OPEC's idle production capacity of 5 million barrels per day (bpd) -- more than the 2 million bpd it held in 2008 when oil spiked to a record $147 a barrel -- could help prevent a surge in prices this year.
"In the absence of geopolitical factors, this may well cushion the markets from a spike in 2011," Voser said at a news conference to discuss Shell's results.
So far, the crisis has not affected traffic on the Suez Canal or flows on the Suez-Mediterranean (SUMED) oil pipeline. Egypt controls both routes, which together moved over 2 million bpd of crude and oil products in 2009.
Ben Westmore, commodities economist at National Australia Bank, said that plentiful oil supply could weigh on prices when concern over Egypt eases.
"Once the tensions there begin to moderate, then you will have the market focusing again on fundamentals. We still have this abundant supply, so there is definitely more downside than upside," he said.
U.S. crude inventories rose last week, a government report showed on Wednesday. Stocks at Cushing, Oklahoma, the delivery point for U.S. futures, hit a record, keeping the pressure on the U.S. marker relative to Brent. [EIA/S]
In other markets, European shares were lower after a batch of disappointing earnings reports, notably from Shell. There were no surprises from the European Central Bank, which kept interest rates on hold at a record low of 1 percent.
The euro extended losses against the dollar after ECB President Jean-Claude Trichet said inflation expectations remain firmly anchored, leaving intact expectations for stable rates.