Oil Prices Soar As Violence Deepens In Egypt

Oil prices have jumped as spiralling violence in Egypt raised concerns that petroleum supplies could be threatened.

US benchmark West Texas Intermediate for September delivery rose 48 cents to $US107.33 a barrel on the New York Mercantile Exchange on Thursday.

European benchmark Brent crude for delivery in September increased 91 cents to $US111.11 a barrel.

Thursday’s rise in oil prices came as escalating violence in Egypt was roundly condemned by the US and other countries.

At least 578 people were killed in the attacks that swept Egypt on Wednesday, the health ministry said, including an estimated 43 police officers.

“Developments in Egypt are on centre stage again and will continue to apply upward pressure on oil prices,” said Sanjeev Gupta at EY consultants.

Consultant Stephen Schork noted that Thursday’s rise in oil came even as US equity markets retreated significantly. The two markets frequently move in tandem, he said, suggesting a political “risk premium” has reentered the oil market.

“This is more of risk getting priced in given how horrible the situation is in Egypt right now,” Schork said.

Traders are worried that the unrest could hit crude shipments through the Suez Canal and Sumed Pipeline, which provide a link between Europe and oil producers in the Gulf.

Although Egypt is not a major oil producer, the Suez canal carries about 2.5 million barrels daily, about 2.7 per cent of global supply.

“Although oil transport through the Suez Canal and the neighbouring Sumed pipeline is not expected to be hampered, given that these are under military protection, the risk premium is nonetheless likely to rise following the latest events,” Commerzbank analysts said in a note to clients.

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