Oil Rises On Egypt Upheaval, US Inventories

Crude oil rose for a fourth day on Thursday as Egypt’s political calamity triggered supply fears while the drop in U.S. oil inventories helped crude prices extend gains.

A state of emergency was declared by the Egyptian government following deadly clashes between police forces and supporters of ousted President Mohamed Mursi.

Although Egypt is not a major oil producer, it controls the Suez Canal which is an important gateway not just for oil shipments but also for commodities.

For the time being, the Suez Canal and Egypt’s ports are operating normally, however if the canal will be closed due to rising violence, the impact will be quite severe.

Furthermore, there are fears that the unrest in Egypt could spill over into key oil producing nations in the region affecting supplies.

“When the demand outlook is positive, any threat to supply or actual disruptions are going to give oil prices a big push”, said Carl Larry.

- Crude is trading around $107.01 a barrel after falling $0.16

- Brent is trading around $110.52 a barrel after falling $0.32

In Libya, the deputy oil minister said that production had fallen to 600,000 barrels a day due to field problems while Ras Lanuf terminal remains closed due to labor unrest.

Adding to the upside pressures on oil prices was the falls in U.S. crude inventories last week for the sixth straight week, hitting their lowest level since March, 2012.

Crude stockpiles fell by 2.8 million barrels last week, gasoline inventories fell by 1.2 million while distillates rose by 2 million, the EIA report showed Wednesday.

Also supporting prices was yesterday’s data which showed that the economies of Germany and France grew faster-than-expected pulling the eurozone out of an 18-month recession.

Meanwhile, worries over when the US Federal reserve will start to reduce its $85 billion in monthly bond purchases persist, which may keep markets on the edge.

- Natural gas is trading at $3.334 per cubic feet after falling 0.24%

- Gasoline is trading at $2.9909 per cubic feet after rising 0.27%

- Heating oil (diesel) is trading at $3.0531 a gallon after rising 0.17%