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Oil rockets to $101 per barrel on Egypt unrest

Oil surged beyond $100 on Monday for the first time since 2008, as traders fretted over spreading unrest in Egypt that could disrupt the flow of oil through the Suez Canal.

London’s Brent North Sea crude for delivery in March surged as high as $101 per barrel in late afternoon deals — which marked the highest level since October 1, 2008 — moments after passing the crucial $100 milestone.

“It is quite clear that a risk premium due to the Egyptian situation pushed Brent above $100 per barrel as soon as the US came into the market this afternoon,” SEB Commodity Research analyst Filip Petersson told AFP.

“In the light of uncertainty regarding the Suez Channel, the SUMED pipeline and a spread of political unrest in the region, we consider the risk premium justified.”

Oil has soared beyond $100 despite earlier assurances from OPEC’s chief that the cartel stood ready to raise output should the Egypt crisis hinder supplies.

A sea of protesters flooded downtown Cairo on Monday, brushing aside concessions by President Hosni Mubarak and vowing to topple his regime with strikes and million-strong marches in the capital and Alexandria.

Protesters in Cairo vowed they would only be satisfied when Mubarak quits, and promised to step up their efforts to bring down his creaking regime, after a week of revolt in which at least 125 people have been killed.

“Brent oil surged above $100 … following concerns that ongoing protests in Egypt might cause further political and economic uncertainty in the Middle East with potential disruption in oil supplies — as the possible closure of the Suez Canal seems to be on the horizon,” Sucden analyst Myrto Sokou said.

Brent crude oil later stood at $100.83 per barrel, up $1.43 from Friday’s closing level. New York’s main contract, light sweet crude for March, gained $2.10 to $91.44.

Danish shipping and oil group A.P. Moeller-Maersk said it was suspending activities in Egypt, amid growing fears over the unrest rocking the country, but said ships would continue sailing the Suez canal.

The deputy head of the International Energy Agency, Richard Jones, warned that political unrest in North Africa and the Middle East was a “key” uncertainty hanging over oil markets.

And OPEC secretary-general Abdalla Salem El-Badri warned that “there could be a real shortage” of crude oil passing through the Suez.

“If we see a real shortage, we will need to act,” he told reporters on the sidelines of an oil conference in London.

However, El-Badri stressed that “the market is well supplied” with strong inventories and “demand is less than last year” at this time.

The OPEC chief added that he saw no need for an emergency production meeting ahead of the next scheduled gathering in Vienna in June.

The Organization of Petroleum Exporting Countries pumps about 40 percent of the the world’s oil, with the bulk coming from member Saudia Arabia.

“If the situation (in Egypt) calms down, Brent is likely to move lower again as we began to see some late winter weakness just before Egypt started to heat up,” added Petersson.

However, Emma Pinnock, analyst at UK energy consultancy Inenco, predicted that oil would soon strike $110.

“Oil prices are set to move rapidly towards $110 a barrel as a weak dollar, greater global demand and tighter supplies create similar conditions to when prices reached a record high of $147 in 2008,” Pinnock said.

“Prices rose by more than 15 percent during 2010 and $110 a barrel is looking more likely as we can see similar market conditions to when oil reached a record high in 2008.”

She added: “The situation in Egypt has caused the market to worry about the flow of oil in the Middle East — and obviously decisions made by OPEC in the next few months will also have a huge impact on prices.”

Copyright © 2011 AFP

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