Oil prices rose on both sides of the Atlantic, and Brent hit a four-month high on Thursday on fears that escalating violence in Egypt could affect the Suez Canal or spread across the Middle East, where supplies already face disruptions.
Hundreds of supporters of Egypt’s Muslim Brotherhood stormed a government building in Cairo on Thursday and set it ablaze, a day after the government declared a state of emergency following deadly clashes between riot police and supporters of ousted President Mohamed Mursi. Hundreds marched in Alexandria, Egypt’s second-largest city, as well.
While Egypt is not a major producer of crude oil, it is home to the strategically important Suez Canal and the Sumed pipeline. Investors fear the unrest could choke supply routes or spill over into oil-exporting neighbors.
“Disruptions at the Suez Canal are unlikely, but markets never move on what’s likely. They move on fear,” said Michael Hewson, an analyst at CMC Markets.
The Suez Canal and Egyptian ports were operating normally, shipping sources said on Thursday.
Libya has restarted refined-product exports from its largest refinery, Ras Lanuf, but most crude oil terminals including Es Sider, the biggest, remain blocked by protests, with exports still running at less than half of normal.
On Wednesday, the deputy oil minister said output had fallen to 600,000 barrels per day (bpd) due to field problems.
In Iraq, officials said the government was undecided about whether to carry out full maintenance on its Basra export terminal in September, creating more uncertainty.
“As long as Libya does not return to exporting crude oil, it will be difficult for markets to significantly weaken. Run cuts will reduce some demand for crude oil, but run cuts are not a long-term solution to a supply disruption,” said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.
“We now have to add for this weekend a weather risk as we are starting to get some candidates on the tropical front,” he added.