US crude tops $100 on Egypt concern

US crude oil topped $100 a barrel and hit its highest level in more than a year, as mounting violence in Egypt increased concerns about the flow of tankers through the Suez Canal, a key choke point for the global oil trade.
Nymex West Texas Intermediate jumped more than 2 per cent to as high as $102.18 a barrel on Wednesday morning in London, climbing above $100 a barrel for the first time since September, and touching highs not seen since last May.
About 5 per cent of seaborne crude passes through the Suez Canal, as well as 14 per cent of seaborne liquefied natural gas, making the canal a key transit point for global energy markets.
The canal has been targeted during anti-government protests in Egypt already this year, according to Barclays.
In February, the Suez Canal authority was forced to close its offices because of protests, while in March, demonstrators tried to disrupt transit through the canal by untying speedboats, analysts at the bank said.
Along with persistent disruptions to supplies in Libya from armed militias, the unrest in Egypt is adding to concerns about geopolitical risk in north Africa.
Antoine Halff, the influential head of the International Energy Agency's oil markets division, has warned of a delayed impact of the Arab Spring on oil production, and the IEA is forecasting no net growth in oil output from Africa's four Opec members over the next five years.
However, other analysts warned against overreacting to the Egyptian violence.
"Each time there is a bit of confusion in Egypt, there will be calls that a geopolitical premium needs to be added to oil because of the risk to the Suez Canal, but if there is one thing that the military has control of in Egypt it is the . . . canal," said Olivier Jakob, managing director of Petromatrix, a Swiss-based consultancy.
Brent crude, the global benchmark, also jumped more than 1 per cent to as high as $105.61 a barrel, but WTI's more rapid advance reduced the discount of US to European crude to as little as $3.09, the smallest since the end of 2010.
WTI crude has traded at a persistent and often deep discount to Brent for the past three years as surging US shale production has led to a glut of oil at Cushing, the delivery point for WTI in Oklahoma.
But an increase in capacity to pipe crude away from Cushing is helping to narrow the spread towards $3, the tariff for moving oil from Cushing to refineries on the US Gulf Coast.
The rally in WTI has also been supported by surveys forecasting a large drop in inventories at Cushing when the US Energy Information Administration publishes weekly stocks data later on Wednesday.

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