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Egyptian riots add pressure on Opec
OPEC is under pressure from consumers to boost supply as most of the world’s benchmark crudes surpass $100 a barrel amid political unrest in North Africa and the Middle East. Oil prices are high enough to “derail” the global economic recovery, Fatih Birol of the International Energy Agency said this week. Saudi Arabian Oil Minister Ali al-Naimi said last week prices nearer $75 would be “appropriate.”
Goldman Sachs Group Inc says the Organization of Petroleum Exporting Countries has already raised output.
“OPEC needs to put in more barrels this year, given how strong demand has been,” said Amrita Sen, a commodity analyst at Barclays Capital in London. “Above $100 there would be a bit more urgency to increase their volumes, because at the end of the day what they want is more stability.” Riots in Egypt that have led to concern of disruption to shipments through the Suez Canal sent North Sea Brent above $100 a barrel for the first time since October 2008 this week. Six of the world’s ten most-used oil price markers, including Nigeria’s Bonny Light, Malaysia’s Tapis, Indonesia’s Minas and Louisiana’s Heavy Sweet and Light Sweet grades, have breached three digits, stoking speculation governments will struggle to contain inflation as economies recover from the recession.
Twelve European nations, recuperating from last year’s sovereign debt crisis, already face record gasoline prices, including taxes, European Commission data on Bloomberg shows. Brent crude dropped $1.90 to $99.86 a barrel on the ICE Futures Europe exchange in London. It reached $103.37 during yesterday’s trade, the highest level in 28 months. West Texas Intermediate fell as much as 2.3 per cent to $88.45 on the New York Mercantile Exchange after a US government report showed that the economy added fewer jobs in January than economists forecast.
“Just before the turmoil in Egypt we already had very high prices as a result of strong demand growth expectations for the next year,” Birol, the chief economist of the Paris-based IEA, which has advised energy-consuming nations since 1974, said in a February 2 interview. “The turmoil in Egypt has been a trigger. Brent over $100 is a risk to derail the economic recovery.” Rising demand means an extra 300,000 barrels a day is needed from OPEC to stem oil’s advance, Bank of America Merrill Lynch said on January 25. The four benchmark crudes that haven’t risen above $100 a barrel are WTI and Mars blend in the US, Oman and Murban grades in the Middle East. (Bloomberg)
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