Oil prices have spiked due to tension in Egypt. Brent crude hit US$100 per barrel for the first time since 2008 on fears instability could spread through the Middle East, which together with North Africa pumps over a third of the world’s oil.
“I expect oil prices to reach US$110 during the first half of 2011, however, it could go above that level if Egypt’s current crisis continues,” Imad al-Atiqi, a member of the Opec member’s highest oil policy body, told Reuters in a telephone interview.
“A huge amount of oil passes through the Suez Canal and the country’s stability is essential for the Middle East’s stability, particularly Israel,” he said.
Egypt is a small oil and gas exporter and the main danger of the unrest is seen as the closure of the Suez Canal or the Suez-Mediterranean (SUMED) oil pipeline which passes near Cairo.
The canal ships 1.5 million barrels per day (bpd) of crude and the pipeline carries one million bpd. Together they account for nearly three per cent of daily global oil demand.
On Thursday, Egypt’s Prime Minister Ahmed Shafiq said the Suez Canal was operating normally despite the unrest.
Some oil-focused bankers and fund managers say that even if unrest in Egypt cuts flows along the strategic pipeline and the Suez Canal, the oil price spike would likely be short-lived and flows would resume quickly, regardless of whoever is in power.Opec members are comfortable with an oil price ranging between US$90 to US$100 a barrel, Atiqi said, adding the group could meet before their scheduled meeting in June if prices continued rising quickly above US$110 a barrel.
Opec ministers and consumers will discuss oil output policy on the sidelines of an international energy conference in Saudi Arabia on February 22, but a formal decision there was unlikely, the Opec secretary general had said.
Opec says it has spare capacity of 6 million barrels to meet lost output but would do it only when it sees a shortage in the market rather than speculator-driven rallies. — Reuters