* Brent this week atop $100 for first time since Oct. 2008
* IEA says Egypt poses situation, not an emergency
* Market awaits U.S. API weekly inventory statistics
(Updates prices, IEA comment, analyst quotes))
By Jessica Bachman
LONDON, Feb 1 (Reuters) - Oil hovered above $100 on Tuesday
as the market assessed the risk of Egypt's social unrest
spreading to neighbouring OPEC members, but stayed below
yesterday's high of $101 on lower factory growth in China.
Analysts and traders agreed that the popular uprising
against the Egyptian government was unlikely to disrupt tanker
movement and oil flows along the strategic Suez canal and Sumed
pipeline, but said that the restive mood in the region will
support prices.
"Even if the worst case scenario of a complete halt of
traffic through the crucial link materialises, the global
surplus in shipping capacity would allow a switch to the longer
haul journey around southern Africa without too much of a
headache," JBC Energy said in a research note.
"However, there appears to be a substantial risk that events
could spread to other countries in the region," the report said.
The unrest in Egypt comes on the heels of an uprising in
Tunisia that toppled the country's president and is keeping
global investors and traders on the lookout for any signs of
copycat unrest in neighbouring OPEC producer Algeria.
Brent crude for March <LCOc1> slid 48 cents to $100.54 a
barrel as of 1006 GMT, after topping $100 for the first time
since October 2008 on Monday, when prices touched an intraday
high of $101.73. U.S. crude <CLc1> shed 10 cents to $92.09.
The International Energy Agency said on Tuesday that the oil
market does not face any emergency, but called on OPEC to remain
"flexible" in the event that contagion does spread and shortages
begin to show. []
But many traders said that perceived risk, while unsupported
by any evidence of a direct threat to ships passing through the
strategic Suez canal connecting the Red Sea with the
Mediterranean, could lead to further rises.
"$100 is not a final target for Brent," said Tetsu Emori, a
fund manager at Tokyo-based Astmax Co Ltd.
"$110 and $115 could be reached by the end of the year.
People now have to take geopolitics into consideration. Even if
nothing happens in Egypt, it allows investors to take on
additional risk and develop long positions in the hope of making
more money."
Egypt's anti-government protesters, sensing victory after
President Hosni Mubarak agreed to discuss sweeping political
reforms, rallied support for what they hope will be a
million-strong march for democracy on Tuesday. []
Mubarak's newly appointed vice-president began talks with
opposition figures and the army declared the protesters' demands
"legitimate" and said it would hold its fire.
"While short-term risks remain skewed to the upside, we
think that the current price strength is likely to ease once the
situation in Egypt normalises. Spare OPEC production capacity
remains ample, which should prevent a rapid tightening of the
market balance," said analysts from Credit Suisse.
OPEC AND THE CHINA FACTOR
The Organization of the Petroleum Exporting Countries says
it holds about 6 million barrels per day (bpd) of idle
production capacity -- equal to 7 percent of world demand --
that it could tap to fill any shortage. Most of this capacity is
held by Saudi Arabia.
OPEC is concerned by unrest in Egypt but sees no need for an
immediate boost in its output. []
While Egypt's social upheaval kept Brent crude firmly above
$100, China's factory growth slowed to a five-month low,
signalling demand may not rise as quickly in the world's
second-largest oil user. []
U.S. crude inventories likely rose 2.8 million barrels last
week on higher imports, while colder weather drew down
distillate stockpiles by 1.2 million barrels, a Reuters poll of
analysts showed. []
The industry-funded American Petroleum Institute will issue
its weekly data on U.S. oil inventories on Tuesday, followed by
the government's Energy Information Administration report on
Wednesday.
(Writing by Jessica Bachman; Editing by Jason Neely)
