Egypt Unrest Could Trigger Oil Price Hike

Crude oil prices have risen over, recovering much of the loss the commodity suffered during the financial crisis.

Light sweet crude futures for March deliveries gained 46 cents to $91 per barrel last Friday in New York, while North Sea Brent crude for March deliveries settled at $102.67 per barrel, the highest price point since late 2008.

Egypt itself is not a big producer of oil, but nearby nations in the Middle East—Kuwait, Iraq, and Saudi Arabia—are. Its Suez Canal, which connects the Mediterranean Sea and the Red Sea, and the SuMed oil pipeline, which runs the length of the canal and supplies oil, combined supply 3 percent of the world’s crude oil demand.

Experts say that if either one of those supply points were disrupted, oil prices could rise quickly.

Last Friday, the Venezuelan oil minister said in a statement that OPEC would likely call an emergency meeting should the Suez Canal close due to unrest in Egypt, and oil prices could rise to $200 per barrel. Report syndicated that protesters might hijack the canal as a statement, delivering an economic shock to the regime.

But some analysts say that oil isn’t likely to go much higher as the current prices already reflect dangers of disruptions—and oil prices will come down quickly should such fears subside.

Investors have already built in some risk in shipping disruptions, as global shipping firms such as General Maritime Corporation and Nordic American Tanker Shipping Ltd. saw their stock prices rise last week on such concerns.

In addition, there are some contagion fears to consider. Egypt itself is not a big oil supplier, and any canal disruptions are temporary. However, if political unrest spreads to other nations in the Gulf, especially to some of the bigger oil players, it will have a much bigger effect on global oil prices.

(Source: theepochtimes)


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