THE PRICE OF OIL is expected to breach the $100-a-barrel barrier for the first time since late 2008, as markets prepare for the possibility that the political protests in Egypt could spread to oil-producing nations.
In London, the price of Brent North Sea Crude this morning stood at $99 – a slight fall on prices yesterday, but still threatening to breach the $100 barrier. In New York, the price rose slightly to over $90 per barrel.
The price of oil on world markets has risen over fears that the current anti-government protests in Egypt – where President Mubarak has repeatedly refused to step down after 30 years in power – could disrupt the supply of oil through the Suez Canal, which WSJ says carries 1.8 million barrels a day.
The Guardian adds that the closure of the Suez Canal would mean oil tankers would have to sail around Africa in order to make it to Europe or America – adding an extra 6,000 miles, and several weeks, to its journey.
The spike in prices could continue if the unrest in the Middle East – which has already seen wider protests in Tunisia and Yemen – spreads to more prominent oil-producing nations like Saudi Arabia.
“Although we see the risk of political contagion as relatively low in the more affluent countries, financial contagion has already spread to these regions, raising the cost of oil production,” Goldman Sachs analysts said.
Ratings agency Moody’s has this morning triggered further financial headaches for Egypt, by downgrading its rating of the country’s government bonds to Ba2 – firmly into ‘junk’ territory.
To embed this post, copy the code below on your site
have your say