In a dramatic development, Egyptian vice president, Nobel laureate Mohamed ElBaradei, announced his resignation. In a letter to the interim president, ElBaradei said, “It has become too difficult to continue bearing the responsibility for decisions I do not agree with and whose consequences I fear.” He said his conscience was troubled over the loss of life ‘particularly as I believe it could have been avoided’. “Unfortunately those who gain from what happened today are those who call for violence and terror, the extremist groups,” concluded ElBaradei.
The violence in Egypt sent crude oil climbing to 107.16 this morning as markets stress over possible supply disruptions. It has been a dramatic turn of events for the Muslim Brotherhood, who just over a year ago celebrated Morsi’s win as Egypt’s first elected president. But his turbulent year in power, marred by political turmoil, deadly clashes and a crippling economic crisis, turned many against the Islamist movement.
Crude oil prices had declined earlier in the day ahead of inventory data from the EIA. The API showed a slower than expected decline in inventory earlier in the week. Brent crude oil prices slipped toward $109 a barrel on Wednesday as investors booked profits from a recent rally but concerns over Middle East supply disruptions and a reduction in US oil stockpiles supported prices. Brent was down 34 cents at $109.3. US oil briefly turned positive in choppy trade after the US stockpiles data was released but later fell by a dollar to hover below $106 a barrel. Oil prices also shrugged off earlier data suggesting the eurozone’s longest ever recession was over, with analysts saying that still-sluggish growth figures and cuts in throughput at European refineries pointed to weak demand. The Energy Information Administration (EIA) reported that US crude oil stocks at the Cushing, Oklahoma delivery hub were down 1.36 million barrels to 38.52 million.
Libya’s deputy oil minister said on Wednesday that production had fallen to 600,000 barrels a day due to field problems while Ras Lanuf terminal remained shut. Maintenance at Iraq’s southern oil export hub is also set to slash supplies by 500,000 barrels per day in September. Analysts are agreed that sustained supply disruptions would support Brent but many say major price increases would require more widespread cuts and higher demand. Crude has to balance between disruptions in Libya and Iraq and the problem of global demand from the rise of the dollar. Traders fear the bloody unrest in Egypt could hit crude shipments through the Suez Canal and Sumed Pipeline, which provide a link between Europe and Asia and allows ships safer and faster travel between the regions without having to sail around Africa. While Egypt is not a major oil producer, the Suez Canal carries about 2.5 million barrels daily, roughly equal to 8 per cent of the output of cartel OPEC.
Bloomberg reported that natural gas futures declined in New York for the second time in three days on speculation that mild weather will expand a U.S. stockpile surplus. Gas dropped 0.8 percent as government data scheduled for release Aug. 15 may show that inventories rose 71 billion cubic feet last week, based on the median of 10 analyst estimates compiled by Bloomberg. The five-year average gain for the period is 42 billion. The weather may be normal or cooler than average in most of the eastern U.S. through Aug. 21, according to Commodity Weather Group LLC. Natural gas is trading at 3.335 down 10 pips ahead of today’s inventory report.