Oil rose for the first time in six days amid reports that Egyptian President Hosni Mubarak may resign later today and hand over power to the military.
Oil increased after Egyptian state television said the president would address the nation within hours. Egypt’s top military body decided today to stay in permanent session in response to the “legitimate” demands of the people, according to a statement read on state television. Egyptian unrest sent oil to two-year highs last month.
“What we don’t know is if this is 1979 Iran all over again or if it’s completely different,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. Islamic clerics rose to power in Iran in 1979, ousting the U.S.- backed shah. The largest group opposing Mubarak is the Muslim Brotherhood.
Oil for March delivery rose 65 cents, or 0.8 percent, to $87.36 a barrel at 12:16 p.m. on the New York Mercantile Exchange. Oil has gained 17 percent in the past year.
Crude oil more than doubled in 1979 when the regime of Iran’s Shah Mohammed Reza Pahlavi was toppled, slashing the nation’s oil exports. Iran is OPEC’s second-largest oil producer after Saudi Arabia. Egypt controls the Suez Canal and the Suez- Mediterranean Pipeline, through which 2.5 percent of global oil production moves, according to Goldman Sachs Group.
Hundreds of thousands of people have demonstrated in Cairo’s Tahrir Square since Jan. 25 seeking an end to Mubarak’s 30-year rule. New York oil futures surged to $92.84 a barrel on Jan. 31, the highest price since October 2008, amid concern that shipments through the canal would be disrupted and that political unrest in Egypt could spread to the Middle East’s big oil producers.
Crude also advanced as U.S. jobless claims fell to the lowest level since July 2008 in a Labor Department report and the International Energy Agency and OPEC boosted their global demand forecasts for crude.
The IEA raised its 2011 consumption estimate by 140,000 barrels a day, and OPEC said it will have to pump 400,000 barrels a day more than it estimated last month.
Global oil consumption will increase by 1.5 million barrels, or 1.7 percent, to 89.3 million a day this year, the IEA said today in its monthly Oil Market Report.
Brent crude for March settlement fell 72 cents, or 0.7 percent, to $101.10 a barrel on the ICE Futures Europe exchange in London. Brent cost $13.74 a barrel more than New York futures. The differential rose to a record $15.11 a barrel yesterday.
“A lot of what we are seeing is due to the spread between WTI and Brent,” said Kyle Cooper, director of research for IAF Advisors in Houston. “The spread between the two grades has got to come back in line. A Brent premium of $2 or $3 makes sense, not $15, especially given that WTI is a higher-grade crude.” BW