Oil hovers above US$87 in Asia Tuesday as Suez Canal concerns wane(update)

SINGAPORE: Oil prices hovered above US$87 a barrel Tuesday in Asia as fears ease that protests in Egypt could disrupt Middle East crude supplies.

Benchmark crude for March delivery was down 12 cents at $87.36 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1.55 to settle at $87.48 on Monday.

Oil jumped above $92 to a 26-month high last week as violent clashes between supporters and opponents of Egyptian President Hosni Mubarak raised concern shipping through the Suez Canal - a major transit point for crude oil and cargo - could be affected. However, so far the political crisis has not affected crude supplies, and as the violence has waned this week, crude prices have slid back below $90.

Traders will also be watching closely the latest U.S. crude inventory figures this week for insight into the strength of demand for oil. The American Petroleum Institute is scheduled to announce its supply data later Tuesday while the Energy Department's Energy Information Administration reports Wednesday.

"Improvement on virtually every economic front except the housing market has generally been surprising on the bullish side during recent months," Ritterbusch and Associates said in a report. "Most oil demand forecasts across this year may require some upward revisions especially if the employment picture improves enough to begin forcing some meaningful improvement in gasoline consumption."

In other Nymex trading in February contracts, heating oil was steady at $2.71 a gallon and gasoline gained 0.2 cent to $2.45 a gallon. Natural gas futures for March delivery were up 1.3 cents at $4.12 per 1,000 cubic feet.

In London, Brent crude was up 1 cent at $99.88 a barrel on the ICE futures exchange. - AP

Earlier report

Oil price lower as Egypt, supply worries retreat

NEW YORK: Oil prices fell Monday as investors shifted their focus from unrest in Egypt to the U.S. economy.

West Texas Intermediate crude, or WTI, for March delivery fell US$1.55 to settle at $87.48 a barrel on the New York Mercantile Exchange.

In London, Brent crude lost 58 cents to settle at $99.25 per barrel on the ICE Futures exchange.

Violent anti-government demonstrations in Egypt settled down after government officials negotiated on Sunday with opposition leaders, although many protesters still called for President Hosni Mubarek to step down. The lull eased fears of potential interruptions to crude supplies from the region.

Egypt controls the Suez Canal and a nearby pipeline that together carry about 2 million barrels of day from the Middle East to customers in Europe and America. That compares to about 87 million barrels consumed worldwide every day.

"The market seems to be developing a thick skin about the events in the Middle East in particular," Tradition Energy analyst Gene McGillian said. "I don't think there's as much of a worry about supply disruption."

Traders began looking more closely at the U.S. economy again after a mixed jobs report on Friday followed an Energy Department report showing record-high inventories at Cushing, Okla., the delivery point for benchmark WTI.

In addition a stronger dollar deterred some buyers. Since oil is priced in dollars, a stronger dollar makes it more costly for buyers who use foreign currencies.

Several analysts expect oil prices to trade in a narrow range over the next few days, moving on the day's news.

"We feel that this week will be characterized by a drift down in crude prices on days where either no new tensions arise or where political progress is perceived," JPMorgan analyst Lawrence Eagles told clients in a research note.

In other Nymex trading in March contracts, heating oil rose 1.06 cents to settle at $2.7061 a gallon and gasoline futures gained 1.52 cents to settle at $2.4505 a gallon. Natural gas fell 20.6 cents to settle at $4.104 per 1,000 cubic feet. - AP

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