Crude rises to five-month high as Egypt turmoil escalates
BY DAN STRUMPF
NEW YORK -- Brent crude-oil futures shot to a five-month high Thursday, as escalating violence in Egypt has traders concerned about broader turmoil and supply disruptions in the region.
Prices rose for the fifth session in a row after the Egyptian government confirmed that the death toll in Egypt rose to at least 525 after a bloody crackdown on Muslim Brotherhood supporters in Cairo. Egypt's interim government announced a month-long national state of emergency.
Egypt is home to some of the world's most important oil chokepoints. Nearly three million barrels of oil a day-about 7% of all seaborne oil-passes through the Suez Canal, a key thoroughfare for Middle Eastern crude. About 1.54 million barrels of oil a day passes through the Suez-Mediterranean Pipeline, which like the canal connects the Red and Mediterranean Seas.
Market observers say it is unlikely either route would close. Nonetheless, traders are worried that the violence could spread to other big oil producers in the region.
"Although I don't expect that we'd see a closure of the Suez Canal, my biggest concern is how the factions throughout the Middle East are lining up for or against the Egyptian government and how the unrest in Egypt could spread to other regions," said Andy Lipow, president of Lipow Oil Associates, a consulting firm.
Brent crude for September delivery settled 91 cents, or 0.8%, higher at $111.11 a barrel on the ICE Futures Europe exchange, its highest finish since March 5 and expiring at the close of trading.
Light, sweet crude for September delivery settled 48 cents, or 0.4%, higher at $107.33 a barrel on the New York Mercantile Exchange, the highest level in two weeks.
No supply disruptions along either route have been reported. On Wednesday, a canal spokesperson told Dow Jones Newswires that security at the canal had been increased and shipping was at normal levels.
"It's a reach to think that the Suez Canal is going to get shut down," said John Kilduff, founding partner of Again Capital in New York. "The canal is almost impregnable given the military there."
Oil prices have been lifted for the last several sessions by the escalating turmoil in Egypt, the worsening conflict in Syria and protests in Libya. Meanwhile, declining U.S. oil stockpiles have also given support. On Wednesday, the EIA said U.S. oil stockpiles fell by a bigger-than-expected 2.8 million barrels last week.
Prices also got a boost from a Labor Department report Thursday that showed the number of Americans filing new applications for jobless benefits fell last week to the lowest level since October 2007. The data indicated that employers are laying off fewer workers, a development that could lift demand for gasoline.
"Everybody's economy seems to be on the upswing now. I don't see any reason to see this market going back down," said Carl Larry, president of Oil Outlooks and Opinions.
Front-month September reformulated gasoline blendstock, or RBOB, settled 0.15 cent, or 0.1%, higher at $2.9845 a gallon. September heating oil settled 2.50 cents, or 0.8%, higher at $3.0728 a gallon.
Dow Jones Newswires