Oil above $110 on Egypt unrest, Fed policy worries

Oil above $110 on Egypt unrest, Fed policy worries
Business & Markets 2013
Written by Reuters
Monday, 19 August 2013 16:03

LONDON (Aug 19): Brent crude oil settled above $110 a barrel on Monday as unrest in Egypt stoked fears over oil supply security across the Middle East and North Africa.

But investors remained cautious as they awaited more clues on when the United States, the world's largest oil consumer, will start to trim a monetary stimulus programme that has helped bolster asset prices such as oil over the last three years.

Brent crude oil futures for October were unchanged at $110.40 a barrel by 0800 GMT. Brent hit a four-month high of $111.53 on Aug. 15 on fears that violence in Cairo could affect the Suez Canal, a major oil conduit.

U.S. oil for September was down 20 cents to $107.26.

"Bloodshed and unrest in Egypt and the disruption of oil supplies from Libya have put a floor under oil prices," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.

Egypt is not a major oil producer, but investors are wary that the unrest there could spread through the Middle East, which pumps more than a third of the world's oil.

Egypt's Muslim Brotherhood said security forces killed dozens of detained Islamists, upping the pressure in a crisis that has rocked the Arab world's most populous state.

At least 850 people have died since Wednesday in clashes pitting the followers of deposed Islamist President Mohamed Mursi against the army-backed government.

Meanwhile, Libya's oil production and exports have been crippled by violence and strikes, pushing exports to the lowest level since the 2011 civil war. The country's largest refinery has reinstated some oil product exports.

Easing some supply fears, crude flows resumed through a pipeline from Iraq's Kirkuk oil fields to Turkey's Mediterranean port of Ceyhan, Iraqi oil officials said on Sunday.

Investors are waiting to see if minutes of the U.S. Federal Reserve's last policy meeting will provide clues to when it will start scaling back stimulus, which could boost the dollar and weigh on oil and other commodities.

"Since the timing and magnitude of the Fed's tapering to its QE program (are) not yet known, market participants will be reading the FOMC minutes closely for implications regarding policy," said Jason Schenker, president and chief economist at Texas-based Prestige Economics.

Some fears of supply disruption eased in the United States with BP Plc saying on Sunday it could start returning offshore workers to its deep water Gulf of Mexico oil and gas facilities after a tropical storm had dissipated.

Gulf of Mexico oil production accounts for 23 percent of total U.S. crude output, according to U.S. government data.