Oil was headed for a second straight week of gains as Egypt's volatile situation kept markets on edge, while investors await US employment data expected to give direction to prices later in the day.
Brent crude for March gained 18 cents today to $101.94 a barrel at 0737 GMT, after touching $103.37 yesterday, the highest intraday price since September 26th 2008, and then sliding on a stronger dollar. US crude rose 40 cents to $90.94.
The Obama administration is discussing with Egyptian officials the immediate resignation of president Hosni Mubarak as one of several scenarios for a transition of power, a US official said.
Front-month Brent has rallied more than $7 since unrest in Egypt started 10 days ago, from about $95 a barrel on January 25th. That 8 per cent gain is more than a third of last year's total increase of 22 per cent.
Violence has raged between pro- and anti-Mubarak demonstrators after the president declared he would resist demands to leave now and would remain in power until September.
Egypt's unrest has sent shockwaves across the Middle East and North Africa, which combined produce more than a third of the world's oil, with protests in Yemen and reforms in Jordan and Algeria after Tunisia's president was toppled last month.
"Ultimately, for the oil market, the uncertainties being introduced by the current political situation in Egypt have a far more long-term bearing," said Barclays Capital analysts.
"Overall, the threat to the oil supply and the consequences of the oil supply loss seem relatively limited in this case, despite the heightened risks of a more violent transition to the new regime," they added.
So far, the unrest in Egypt has not affected traffic on the Suez Canal or flows on the Suez-Mediterranean (SUMED) oil pipeline. Egypt controls both the canal and the pipeline, which together moved over 2 million barrels per day (bpd) of crude and oil products in 2009, the latest data available.
Oil traders also awaited data on US non-farm payrolls for January due at 1330 GMT as an indication for the state of the economy and energy demand in the world's largest oil consumer.
US hiring probably gathered steam in January, marking a fourth straight month of gains, but likely not enough to prevent the jobless rate from ticking up.
Non-farm payrolls are expected to have increased by 145,000 jobs, but severe snow storms that blanketed large parts of the country during the survey period could result in a much lower figure.
In other markets, Japanese shares rose today, lifted by news of a mega merger in the steel sector, while a rebounding dollar put a slight dent in a commodities rally that saw copper hit a record $10,000 a tonne in the previous session.
The euro fell broadly yesterday and could extend those losses after European Central Bank president Jean-Claude Trichet threw cold water on expectations euro zone interest rates would rise any time soon.
Oil prices yesterday were also under pressure from data published by industry tracker Genscape showing crude inventories at Cushing, Oklahoma, the delivery point for the US oil futures contract, hit a record high of almost 41 million barrels.
Rising inventories at Cushing have kept US crude prices at a steep discount of about $11 a barrel to Brent.
Seaborne oil exports by the Organization of the Petroleum Exporting Countries were forecast to rise 410,000 barrels per day in the four weeks to February 19th, according to a weekly forecast from UK oil consultancy Oil Movements.
The International Energy Agency told the US Congress yesterday that stronger-than-expected demand from rebounding economies as well unrest in Arab countries helped push Brent prices above $100 a barrel.
In Yemen, tens of thousands squared off in peaceful protests for and against the government during an opposition-led "Day of Rage", a day after president Ali Abdullah Saleh offered to step down in 2013.
Algeria, an Opec member, promised to end a 19-year-old state of emergency and provide more political freedoms, concessions designed to keep out a wave of uprisings sweeping the Arab world.
Frigid weather across the US Southwest knocked out natural gas production equivalent to nearly 5 per cent of daily nationwide demand as wells froze and the cold weather caused problems for processing plants.
Reuters
