Riots in Egypt could lead to higher oil prices

[dan_s]

NYMEX traders definitely took oil prices higher today on fear that the riots in Egypt could disrupt the oil supply. However, IMO this will soon settle down so I cannot see oil going to $200/bbl as this article suggests. A revolt in Iran would be a whole different story.
Keep in mind that any government in Egypt will need revenues and the last thing they will want to do is reduce the huge income they get from their share of oil from the concessions.

http://www.newsmax.com/Headline/Egypt-E ... ode=B8FF-1

[par_putt]

The situation could have ripple effects worldwide if the Suez Canal becomes jeopardized or even shut down. According to Canaccord Genuity, “this may be impactful as approximately 1.8 million bb/d of oil was transported through the Suez Canal in 2009. A closure of the canal would result in an extra 6,000 miles of travel for any oil being transported out of the region, an additional cost which could drive up oil prices.” International oil prices are already racing towards the $100 a barrel mark. Brent crude oil contracts for March, “the global benchmark,” hit their highest level since late 2008 at $99.63 per barrel on January 28. West Texas Intermediate March futures were up 4.2% to $89.21. Even gold began to pick up, with Comex February gold spiking in tandem with oil, up 1.7% on January 28 to $1,341.20. (Read Distressed Debt Investors Prefer Real Estate in 2011).

[dan_s]

U.S. and overseas-produced crude prices have tracked separate paths since mid-December. As of Jan. 28, Europe's North Sea Brent was $98.98 a barrel — 11% above the West Texas Intermediate benchmark.

The U.S. price reflects a soft economy. Weak demand has kept oil inventories above their five-year range.

The other side of the equation is China. William Herbert, with Simmons & Co. International, noted last week that higher prices were luring oil from Colombia and Ecuador, normally sold in the U.S. Gulf Coast market, to Mediterranean markets. The volumes are small so far, he said in a Jan. 20 note, but are "an indication of strong demand in Asia pulling barrels east."

The closer to China, the higher the price: Nigeria's Bonny Light benchmark priced at $99.01 on Jan. 21. Malaysia's Tapis and Indonesia's Minas grades both traded above $101. But gaps between West Texas and overseas benchmarks have a history of closing rapidly. Friday's 4% surge narrowed the rift.

Note that TGA oil sales are tied to Brent.

[dan_s]

Sent via e-mail from one of our members that does a lot of work abroad:

"I think the worry is not so much with shipping, but that the unrest may spread to other Arab countries that have despots for leaders. As I do quite a bit of work in S.A., things are not so rosy in Venezuela either… All of this “worry” may tend to drive prices up until people determine the ultimate damage if any."