Oil price: Oil traders are fretting about the protests in Egypt. On Monday, the unrest and concerns over oil shipments passing through the Suez Canal helped push Brent crude above $100 a barrel for the first time in more than two years. Full-scale chaos in the nation could rob the world of 3 million barrels of oil a day. Yet today's Suez isn't what it was in the 1950s, and global oil supplies are still ample. Only a broader conflagration across the region would justify keeping crude prices this high for long.
Turbulence in Egypt inevitably invites comparisons to the 1956 Suez crisis. Then the blocking of shipments through the canal and sabotage to pipelines cut off about 10 per cent of the world’s oil supply — a bigger hit than any subsequent oil shock.
But a repeat is highly unlikely. Egypt itself is an oil minnow with production of just 700,000 barrels a day.
Even adding in the two million barrels a day that pass through the nation's canal and pipelines, the maximum potential damage is three per cent of the world's 87 million barrel-a-day output. And little short of complete chaos in Egypt would cause such an extreme disruption.
What really worries traders is that unrest in Tunisia and Egypt could fuel similar protests in bigger oil producers such as Libya - or even Saudi Arabia. This would create massive uncertainty over oil supplies - though even the most extreme Islamic governments remain happy to profit from oil sales. In the meantime, however, global oil supply is still ample. The OPEC cartel has unused pumping power of 4.6 million barrels a day, more than three times than in 2008, according to the U.S. Department of Energy. Meanwhile, declining demand from rich nations will go at least some way towards offsetting rising usage in China and other fast-growing economies. The oil market tends to factor in the remote chance of catastrophic events. And the chances of a region-wide meltdown - however remote - are greater than a week ago. Still, Egyptian unrest would need to both deepen and broaden to justify keeping oil prices above $100 a barrel.