NEW YORK (Reuters) - Brent crude topped $100 a barrel for the first time since 2008 on Monday, jumping more than 1 percent on unrest in Egypt and rising demand expectations.
Egyptian President Hosni Mubarak overhauled his government in an attempt to defuse a popular uprising that has raised concerns about oil shipments passing through the Suez Canal or that the unrest could spread to Middle East oil producers.
The surge in Brent, which has climbed from $70 a barrel in August on rising global demand, has also stirred worries in consumer nations that a hike in fuel prices could stall a global economic recovery.
Officials from the Organization of the Petroleum Exporting Countries (OPEC) said there was no shortage of oil in the market and no need to increase production right now.
“The whole situation in the Middle East has got traders very nervous even though crude is still coming through the Suez Canal,” said Mike Zarembski, senior commodities analyst for optionsXpress in Chicago.
“If the trouble spreads to other oil-exporting countries in the region, it could push prices higher.”
Severe cold in parts of the Northern Hemisphere this winter has also underpinned oil’s recent rally. Supportive U.S. Midwest factory activity and firmer consumer spending stoked demand expectations and helped turn crude strongly positive.
In London, ICE Brent crude for March rose $1.59 to settle at $101.01 a barrel and reached $101.73 intraday, the highest since prices touched $103.29 on September 29, 2008.
U.S. crude oil for March delivery rose $2.85, or 3.19 percent, to settle at $92.19 a barrel, reaching $92.84 intraday, both the highest since October 2008.
Analysts and brokers had expected Brent’s move over $100 to help U.S. crude push above $92.58, the previous 2011 peak from January 3.
“Momentum is up. Traders are buying dips on fears that things could escalate further in the Middle East and spread to other countries,” said Tom Bentz, broker at BNP Paribas Commodity Futures Inc in New York.
Oil prices were choppy earlier, with traders reassessing Friday’s price surge after fears about contagion failed to materialize at the weekend.
The U.S. price strength narrowed the benchmark West Texas Intermediate crude’s discount to Brent to less than $9 a barrel after the spread widened to a near record above $12 a barrel last week.
Dwindling North Sea production and high U.S. crude inventories, especially at the Cushing, Oklahoma, WTI delivery point, have been factors seen as causing the spread to widen, along with investors’ attraction to the bullish momentum.
U.S. distillates were seen falling for the week to January 28 due to cold weather in the giant U.S. Northeast heating oil market, while an increase in imports was seen boosting U.S. crude stockpiles, according to a Reuters poll of analysts ahead of U.S. inventory data due on Tuesday and Wednesday.
Egypt is not a major oil producer but protests and demands for political change there come two weeks after Tunisia’s president was overthrown and investors worry that oil-producing states in the region may face similar protests.
Egypt controls the Suez Canal and the Suez-Mediterranean (SUMED) Pipeline, which together moved over 2 million barrels per day (bpd) of crude and oil products in 2009.
Shipping has so far proceeded as normal through the 192-km (120-mile) Suez Canal shipping choke point but port operations have been slowed by the protests.
OPEC Secretary General Abdullah al-Badri said the producer group would boost oil supply in the event of a real shortage, but did not expect unrest in Egypt to affect the Suez Canal or SUMED pipeline oil flows.
OPEC ministers will discuss oil output policy on the sidelines of a conference in Saudi Arabia next month, an OPEC delegate told Reuters.
Ministers are scheduled to meet on February 22 in Riyadh with counterparts from oil-consuming nations and the International Energy Agency gathering at the International Energy Forum.
But Saudi Oil Minister Ali al-Naimi told an industry conference that the price spike had more to do with the value of the dollar and the behavior of oil traders.
The dollar weakened against a basket of currencies, with the dollar index down 0.41 percent as euro zone inflation topped forecasts, supporting the view that interest rates in the region could rise before those in the United States.
Additional reporting by Gene Ramos and Janet McGurty in New York, Jessica Donati in London and Alejandro Barbajosa in Singapore; Editing by Matthew Robinson and Dale Hudson