Brent Slips towards $109, but Set for Weekly Rise on Egypt Unrest

Brent crude slipped towards $109 a barrel on Friday, snapping five days of gains as investors worried the Federal Reserve would soon start to trim its commodity-friendly stimulus, but escalating unrest in Egypt supported prices.

Fears that violence in Egypt could affect the Suez Canal -through which a major portion of the world’s oil is shipped – or spread across the Middle East, where supplies already face disruptions, drove Brent to a four-month high on Thursday.

The deeply polarised country braced for renewed confrontation on Friday after the Muslim Brotherhood called for a nationwide march of millions to show anger at a ferocious security crackdown on Islamists in which hundreds were killed.

Brent crude futures for October delivery had slipped 14 cents to $109.46 a barrel by 0250 GMT on Friday, but they were still set for a weekly rise of over 1 percent.

U.S. crude oil futures for September fell 12 cents to $107.21.

“There’s some slight profit-taking going on in the Asian session, but the unrest in Egypt is definitely having an impact and putting a floor on prices,” said Ben Le Brun, an analyst at OptionsXpress in Sydney.

The strategically important Suez Canal and Egyptian ports were operating normally, shipping sources said on Thursday.

Although Egypt is not an oil producer, investors were wary that unrest could spread around the region, with supply disruptions already affecting Iraq and Libya.

Iraq is still undecided whether to carry out full maintenance on its Basra oil export terminals in September, four oil officials said.

And Libya has restarted refined-product exports from its largest refinery, Ras Lanuf, but most crude oil terminals including Es Sider, the biggest, remain blocked by protests, with exports still running at less than half normal levels.

Strikes at Libya’s largest ports have pushed oil production and exports, the lifeblood of the north African country’s economy, to their lowest levels since the civil war that ousted veteran leader Muammar Gaddafi in 2011.

“The Libyan government’s warning that it will use military force to prevent striking security guards from selling oil independently, suggests the situation could easily escalate further,” ANZ analysts wrote in a note on Friday.

SETTING THE STAGE

U.S. equity markets saw their biggest fall since late June on Thursday in the wake of disappointing results from Wal-Mart and Cisco, and on fears positive economic data may set the stage for the Fed to scale back its stimulus soon.

The number of Americans filing new claims for unemployment benefits fell to a near six-year low last week.

“U.S. equity markets put in a very negative performance on Thursday night, so we would have expected oil prices to follow suit,” Le Brun said. “So it just goes to show you what an impact the tensions in Egypt are having on oil prices.”

Source: Reuters