Oil near $101 amid Egypt unrest, stockpiles fall

Oil price eases to below $101 after jumping higher on Egypt unrest, drop in US stockpiles

Associated Press
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Trader Peter Iocolano works in the oil options pit at the New York Mercantile Exchange Wednesday, July 3, 2013. Oil climbed above $101 a barrel as the political crisis in Egypt intensified. (AP Photo/Richard Drew)

The price of oil eased to below $101 a barrel Thursday after jumping higher on unrest in Egypt and signs of rising demand in the U.S.

By early afternoon in Europe, benchmark crude for August delivery was down 48 cents at $100.76 in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract gained $1.64 to $101.24, its highest close since May 3, 2012.

Nymex floor trading is closed Thursday for the Independence Day holiday.

Two events have propelled the price of oil higher in the past days: unrest in Egypt and a big drop in U.S. oil supplies.

Traders were worried that political upheaval in Egypt could slow the flow of oil from the Middle East to world markets.

Embattled Egyptian President Mohammed Morsi vowed not to give in to protesters' demands for his resignation, but was removed from office Wednesday by the country's armed forces and taken into custody.

Morsi was replaced by Adly Mansour, the chief justice of Egypt's Supreme Constitutional Court, who was sworn in Thursday as interim president.

According to military decree, Mansour will serve as Egypt's interim leader until a new president is elected. A date for that vote has yet to be set.

Egypt is not an oil producer but its control of one of the world's busiest shipping lanes gives it a crucial role in maintaining global energy supplies. The Middle East accounts for about a quarter of the world's crude oil output, or 23 million barrels per day. About 2 million barrels of that, or 2.2 percent of world demand, are transported daily through the Suez Canal, which links the Mediterranean with the Red Sea.

Much of that oil is headed to Europe, but a supply drop anywhere in the world leads to higher prices everywhere.

Experts said the ouster of Morsi reduced the risk of prolonged protests that would further destabilize Egypt. "That said, it is still too early to sound the all-clear," said a report from analysts at Commerzbank in Frankfurt.

"Morsi's followers from the influential Muslim Brotherhood are hardly likely to take the overthrow of their president lying down," the analysts said in a note to clients. "The supply risks are thus likely to lend continued support to oil prices, even though the important transport route through the Suez Canal has not been in any sort of danger so far."

In the U.S., the Energy Department reported Wednesday that crude supplies fell by 10.3 million barrels from the previous week, more than three times the drop that analysts had expected.

The drop was likely the result of reduced supplies from Canada because of a temporary pipeline shutdown, as well as increased demand from a BP refinery that restarted in Indiana.

Gasoline supplies fell as well, while analysts expected an increase. The drop in oil and gas supplies could be an indication that U.S. demand is rising.

Brent crude, which is used to set prices for oils used by many U.S. refineries, was down 65 cents to $105.11 on the ICE exchange in London.

In other energy futures trading on Nymex:

— Wholesale gasoline was down 1.39 cents to $2.8243 per gallon.

— Natural gas fell 3.1 cents to $3.659 per 1,000 cubic feet.

— Heating oil retreated 1.49 cents to $2.9363 per gallon.

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