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Brent’s finally done it:
(Reuters) Brent crude oil futures surged above $100 a barrel for the first time in 28 months on Monday on concerns that anti-government protests in Egypt could create instability across the Middle East, possibly disrupting oil shipments through the Suez canal.
In London, ICE Brent crude for March delivery shot up to $100.05 a barrel, rising 63 cents on the day…
And had hit $101 at pixel time, the highest since September 2008.
Point one — Suez isn’t a massive factor for Brent, or Brent’s many other problems or for certain other price distortions that shall go unmentioned here.
Point two — Maersk hasn’t reported problems with its own tankers; Lloyd’s of London hasn’t seen a rise in insurance premiums for ships bound to Suez; etc.
Point three — Self-explanatory stuff from BarCap on Monday:
An outright closure of the canal would seem to require a formal decision by the Egyptian government and the acquiescence of the armed forces… Our discussions with a number of senior experts suggest that the Egyptian military would be reluctant to close the canal in the current circumstances. In the event that a radical, anti-western government emerges in Egypt, there is always the chance that the Canal could again become hostage to international power politics. However, this scenario does not seem to be on the immediate horizon. In addition, the presence of the US Fifth Fleet in Bahrain may act as a deterrent for any government that is considering such a course of action.
Unless RPGs suddenly materialise in the hands of protesters who have been so far content to face down regime jet fighters, helicopters, battle tanks and infantry with nothing but sheer indignation — we’re thinking that army control of the canal looks fairly assured whomever the generals end up supporting in Egypt’s political crisis.
Point four — the point BarCap closed with, actually:
Trade flows through the Suez Canal and Sumed pipeline account for just 4.5% of total global oil supplies. While any short-term disruption on the canal or pipeline would have no impact on underlying oil output, the impact is likely to reverberate through changes in the pattern of world trade on regional crude prices and differentials, with the currently oversupplied tanker market potentially finding some temporary strength. Much like in the 50s and 60s, crude exports earmarked for certain destinations could well find their way to different parts of the world. For instance, African crudes would be likely to get pulled back into the Med rather than going to Asia in current volumes, while the Sumed and Northbound Suez volumes would head to Asia, as the pattern of economic advantage into different regions changes…
…in a market where the epicentre of demand growth has moved to Asia and West African and Middle Eastern crude production is increasingly meeting that demand, the impact of the closure of the Canal this time around would likely be far more limited than in the 1950s and 1960s. However, in terms of oil prices, as we had stated at the start of the year, in a world where spare capacity is being taken less for granted than it was, particularly in early 2010, price breakouts due to geopolitical reasons have become more likely. Indeed, 2011 is already turning out to be a year when it would be risky to get heavily involved in the oil market without maintaining a fairly strong focus on the key geopolitical developments, rendered more acute in a world of phenomenal demand strength, reduced inventory overhang and less spare capacity.
Yep, those are problems that look to us more like why we’re back in a $100 a barrel world, to be honest.
Related links: Egypt protesters maintain pressure - FT Full Brent coverage – FT Alphaville
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