Libya, Egypt push oil prices up to $110 a barrel
Brent crude oil strengthened above $110 a barrel Monday as the loss of Libyan oil exports tightened supply and unrest in Egypt stoked fears for exports from other oil producers in the Middle East and North Africa.
Libya’s oil production and exports have been crippled by violence and strikes, pushing exports to the lowest since the 2011 civil war, although one of the country’s smaller ports was reported to have reopened Monday.
Brent crude oil futures for October were up 30 cents at $110.70 a barrel. Brent hit a four-month high of $111.53 on Aug. 15 on concern that violence in Cairo could affect the Suez Canal, a major oil conduit.
U.S. oil for September was down 30 cents at $107.16.
“Bloodshed and unrest in Egypt and the disruption of oil supplies from Libya have put a floor under oil prices,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.
Egypt is not a major oil producer, but investors are wary that unrest there could spread through the Middle East, which pumps more than a third of the world’s oil.
Egypt is home to the Suez Canal and the Suez-Mediterranean pipeline, which together carry around 4.5 million barrels per day of oil from the Red Sea.
The Egyptian army has said it would guarantee the safety of the Suez Canal and the Sumed pipeline, but any disruption to supplies could have a dramatic impact on the oil market.
Egypt’s Muslim Brotherhood said security forces killed dozens of detained Islamists, upping the pressure in a crisis that has rocked the Arab world’s most populous state.
At least 850 people have died since Wednesday in clashes pitting the followers of deposed Islamist President Mohammad Morsi against the army-backed government.
Goldman Sachs said Monday it expected tighter oil markets to propel Brent to $115 “in the very near term.”
“The disruptions in Libyan oil supplies have lasted far longer than we initially thought with no near-term resolution in sight,” Goldman analysts led by Jeffrey Currie said in a note.
Easing some supply fears, crude flows resumed through a pipeline from Iraq’s Kirkuk oil fields to Turkey’s port of Ceyhan, Iraqi oil officials said Sunday.
Investors remained cautious as they awaited more clues on when the U.S., the world’s largest oil consumer, will start to trim a monetary stimulus program that has helped bolster asset prices such as oil over the last three years.
Minutes on Wednesday of the U.S. Federal Reserve’s last policy meeting will provide some clues to when it will start scaling back stimulus, which could boost the dollar.
“Since the timing and magnitude of the Fed’s tapering to its QE program [are] not yet known, market participants will be reading the FOMC minutes closely for implications regarding policy,” said Jason Schenker, president and chief economist at Texas-based Prestige Economics.
Some fears of supply disruption eased in the United States with BP PLC saying Sunday it could start returning offshore workers to its deep water Gulf of Mexico oil and gas facilities after a tropical storm had dissipated.
Gulf of Mexico oil production accounts for 23 percent of total American crude output, according to U.S. government data.