Brent surges near $107 on Egypt crisis

Egypt crisis06 July 20123, News Wires – Brent crude oil rose towards $107 a barrel on Friday after Egypt’s army said it was on high alert after an attack in Sinai, pushing the price to its biggest weekly gain since last June.

The Egyptian army said it was on alert in the Sinai peninsula after an attack on an airport in the town of El Arish but had not declared a state of emergency, Reuters reported.

So far, ports and shipping through the Suez Canal have been operating normally, two shipping sources and a canal official said.

Brent crude for August delivery was up by $1.35 to $106.89 at 1300 GMT after hitting a high of $107.34 a barrel following the Egyptian army’s announcement.

Front-month prices have risen by 4.7% so far this week, the largest weekly gain since June last year

US crude futures were up 93 cents to $102.07 a barrel after hitting a high of $102.19 a barrel.

Crude was also set to maintain the gains after non-farm payroll data from the US exceeded expectations and offered a sign of strong improvement in the US jobs market.

The US Labor Department said US employers added 195,000 jobs in June versus a forecasted 160,000 predicted by economists surveyed by Dow Jones Newswires.

But such numbers could also support the Federal Reserve’s case to start slowing its bond purchases later this year, which would sap liquidity and drag on commodity prices.

The army took control of Egypt on Wednesday after protesters filled the streets of major cities, asking for the resignation of Muslim Brotherhood President Mohamed Mursi.

The Egyptian uncertainty added to existing supply worries. Almost all physical crude grades consumed by Europe are now short including Russian, Iraqi, Libyan and African grades.

North Sea supplies, which underpin Brent, are expected to be extremely low in the coming months when main grade Forties output is reduced due to maintenance in August.

The Forties crude oil stream, the main North Sea grade, will load about 252,000 barrels per day (bpd) in August, down from 387,000 bpd originally planned in July, a trade source said on Friday.

Libyan ports and various fields have been plagued by worker protests, and its largest export terminal was shut late on Thursday. Port guards locked the gate over salary complaints, preventing workers from continuing operations.

Brent’s premium to the US benchmark fell to its lowest since December 2010 on Wednesday.

In its weekly energy note, Goldman Sachs said the tightening spread was “a reflection of an anticipation of inventory draws in the Midcontinent on the back of increased pipeline and refinery operations”.

Clear signals of loose monetary policy ahead from central banks in Britain and Europe on Thursday may lure investors back to riskier assets such as oil, the note said.

Elsewhere, seaborne oil exports from OPEC, excluding Angola and Ecuador, will rise by 540,000 barrels per day in the four weeks to July 20, an analyst who estimates future shipments said.

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