* Tension escalates as Mubarak clings onto power
* Brent/WTI spread narrows from record high
* OPEC boosts supply to 2-year high in January
(Recasts, updates prices)
By Emma Farge
LONDON, Feb 11 (Reuters) - Brent oil prices rose above $101
a barrel on Friday after Egypt's President Hosni Mubarak refused
to step down, but later pared gains as a stronger dollar sapped
buying interest for commodities.
A U.S. official said he believed that Mubarak has left Cairo
and arrived at the Egyptian resort of Sharm el-Sheikh as angry
protestors marched on the presidential palace. []
[]
ICE Brent crude futures <LCOc1> rose by 62 cents to $101.49
a barrel by 1545 GMT while U.S. crude futures <CLc1> were down
33 cents at $86.40 a barrel. Brent touched a day's peak of
$102.03.
This left the spread between the two benchmarks at around
$15 a barrel, but down from a record high above $16 in the
previous session.
"There was no fresh upside ground on Egypt, the dollar
strengthened and there is a realisation that oil supplies are
not immediately threatened," said Michael Fitpatrick, editor of
the industry newsletter the Energy Overview in New York.
The dollar index rose by around 0.2 percent, making
dollar-denominated commodities more expensive for other buyers.
<.DXY>
Analysts at Commerzbank said that prices, especially Brent,
contained a risk premium because of the unrest in Egypt.
"The market is very, very nervous about Egypt...The level of
fear in the financial market is influenced by events in Egypt.
It remains the most dynamic issue," said the bank's senior
commodities analyst Eugen Weinberg.
Egypt is not a major oil producer and it consumes about as
much as it pumps. However, investors worry more about the
prospect of severed oil flows along a strategic pipeline and the
Suez Canal, which together amount to around 2.5 million barrels
per day (bpd) of crude oil.
Traders are expected to watch closely for any sign that
protests in oil producing nations Iran and Algeria planned for
the next week could develop into broader popular movements
resembling those in Egypt. [] []
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Graphic on the WTI/Brent spread here:
http://r.reuters.com/zad97r
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MARKET JITTERS
Trading has been unusually volatile in the past two trading
sessions as investors have grappled with the significance of
conflicting geopolitical signals in the Arab world.
A market rumour that King Abdullah of top oil producer Saudi
Arabia was seriously ill or may even have died stoked a rally on
ICE Brent futures but prices quickly pared gains after Saudi
sources dismissed the talk. []
Many analysts expect prices to remain volatile.
"It will stay jittery on Egypt concerns," said analyst
Andrey Kryuchenkov of VTB Capital.
Oil prices have largely ignored news that the Organization
of Petroleum Exporting Countries has boosted oil output to a
two-year high to help cool the price rally above $100 a barrel.
In its monthly report, the producer organisation said on
Thursday its January production rose by 400,000 bpd to 29.72
million bpd, the highest since December 2008 when it last made
an official change in its output. []
Oil major Total <TOTF.PA> said on Friday it planned to spend
$20 billion on new oil and gas projects this year to boost
flagging production after reporting bumper 2010 earnings.
[]
"Fundamental data is not prevailing in the market...it is
only creating background noise. It's more about the sentiment in
the market," said Weinberg.
In the United States, economic data was positive with new
applications for unemployment benefits dropping to a 2-1/2-year
low last week, pointing to a stronger footing for the labour
market as the global recovery gathers momentum. []
(Reporting by Emma Farge; Additional reporting by Patryk
Wasilewski in London, Robert Gibbons in New York and Seng Li
Peng in Singapore; editing by Alison Birrane)
