Crude hits 28-month high to $100/barrel on Egypt unrest

Brent oil hit a 28-month peak and closed in on USD 100 a barrel while US crude surged more than 4 percent on Friday as unrest in Egypt rattled markets.

New York: Brent oil hit a 28-month peak and closed in on USD 100 a barrel while US crude surged more than 4 percent on Friday as unrest in Egypt rattled markets.

US oil got an early boost from data showing the US economy gathered speed in the fourth quarter to regain its pre-recession peak, helping narrow the discount to Brent crude after it touched a two-year high.

But the Middle East became the focus as President Hosni Mubarak sent troops and armored cars onto the streets of Cairo and other Egyptian cities on Friday in an attempt to quell street fighting and mass protests demanding an end to his 30 year rule.

"Whenever you have violence in the Middle East, you have (traders) buying on risk," said analyst Andrey Kryuchenkov at VTB Capital in London.

President Mubarak addressed the nation after oil markets had closed and said Egypt needed dialogue not violence to end problems that led to days of protests and that he was sacking his government, adding that he would move to appoint a new government on Saturday.

In London, ICE Brent crude for March rose USD 2.03 to settle at USD 99.42 a barrel and reached USD 99.74 intraday. It was the highest close since September 26 2008, soon after the collapse of Lehman Brothers.

Brent crude posted a 1.86 percent weekly increase.

May Brent and contracts for other months further out on the curve topped USD 100 a barrel intraday on Friday, and the Brent July contract settled at USD 100.18 a barrel.

US crude oil for March delivery rose USD 3.70, or 4.3 percent, to settle at USD 89.34 a barrel, with trade volume just above 1.38 million lots, the second highest to the record 1.432 million lots on April 13, 2010.

US oil ended only up 23 cents for the week and was rebounding from a nearly 2-percent loss on Thursday.

Total Brent trading volume was 570,155 lots traded, according to Reuters data, below the record of 726,578 contracts traded on January 12.

US oil's gains squeezed Brent's premium over its US counterpart to USD 10.08, based on settlement prices, after reaching a two-year high over USD 12 per barrel.
Large volumes of crude at the Cushing, Oklahoma delivery point for US futures have weighed on the US  benchmark this month, while supply concerns have supported Brent.

"Rapidly escalating tensions in Egypt that are spreading into surrounding countries such as Yemen are forcing a significant amount of geopolitical risk premium into the oil complex," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note.

Speculators cut their net long positions in US crude oil by 19 percent in the week to January 25, the Commodity Futures Trading Commission said on Friday, in a report released after settlement prices were posted.

Oil prices fell to USD 86.19 a barrel on January 25 from USD 91.38 the previous Tuesday.

Eyes on Egypt

Stocks around the world fell and the dollar gained on Friday as images of street battles in Egypt riveted investors and raised concerns the protests will intensify and spread across the Middle East.

Despite the unrest, the Suez Canal has been operating normally over the past three days even as the turmoil in Egypt intensified, and the transit schedule for Saturday shows no delays, a shipping source said.
Bureau Report