Oil fluctuates, supported by Egypt turmoil

Oil prices fell during early European trading after swinging between gains and losses in a calm trading session. Concerns over flows and shipments through the Suez Canal and Suez-Mediterranean pipeline persisted, while protests which crippled Libyas oil output and exports still havent been resolved, despite its biggest refinery, Ras Lanuf, resuming some product exports.

On the New York Mercantile Exchange, WTI crude for September delivery traded $106.83 per barrel at 7:18 GMT, down 0.43% on the day. Prices ranged between days high and low of $107.55 and $106.82 per barrel respectively. Light, sweet crude settled at $107.46 on Friday, the highest close since August 1, marking a 1.44% weekly advance.

Meanwhile on the ICE, Brent futures for October delivery fell to a new session low of $110.05 per barrel at 7:20 GMT, marking a 0.32% daily decline. Days high was hit in Asian trading at $110.61 per barrel. The European benchmark rose 1.17% on Friday, settling the week 2.21% higher after plunging 0.65% a week earlier.

Despite falling slightly in a calm trading session, oil prices were supported as escalating political and social turmoil in Egypt spurred concern over oil supply through the state-controlled Suez Canal and Suez-Mediterranean pipeline, through which a combined 4.51 million barrels of oil per day is transported from the Middle East to Europe. Investors also feared that the unrest might spread into neighboring oil producing countries.

At least 830 people were killed in clashes between protesting supporters of the army deposed Islamist President Mohamed Mursi and Egyptian military forces. Some U.S. lawmakers have begun calling for a suspension of the $1.5 billion U.S. military and economic financial aid to Egypt following the escalation of violence. An emergency summit of EU foreign ministers will take place in Brussels this week to discuss immediate aid suspension as well.

Ben Le Brun, an analyst at OptionsXpress in Sydney, said for Reuters: “A lot of the focus is still on the rising tensions in Egypt and what thats going to do to the supply of oil.”

Meanwhile, Libyas biggest refinery, Ras Lanuf, resumed partially oil product exports but the protests which cut Libyas oil output in July by more than half still havent been resolved. Goldman Sachs raised its three-month and six-month price expectations.

Jeffrey Currie, a Goldman analyst in New York, commented: “The disruptions in Libyan oil supplies have lasted far longer than we initially thought, with no near-term resolution in sight, which was further complicated by the involvement of the military. Combined with the ongoing problems in Iraq, which we see extending into the autumn, OPEC outages since the beginning of the summer have taken 33 million barrels off the market.”

Several OPEC members cut their production last month, including Iraq, Kuwait, Nigeria and Saudi Arabia, the leading producer. Russia, the largest oil producer, trimmed its output by 1% to 10.43 million bpd last month.

Easing concern over global supply, oil flows from Iraqs Kirkuk oilfields to Turkeys Mediterranean port Ceyhan have resumed, Iraqi officials said on Sunday. Meanwhile, BP Plc said it may start redeploying personnel to its offshore platforms in the Gulf of Mexico as an expected tropical storm weakened. Oil production in the gulf accounts for 23% of U.S. oil output.

QE outlook

Investors also remained cautious ahead of the minutes of FOMCs latest meeting on July 31, due to be released on Wednesday. Market players hope for information that will bring some clarity on when the Federal Reserve will begin tapering its monetary easing program following the mixed U.S. economic data that was published last week.

Jason Schenker, president and chief economist at Texas-based Prestige Economics, said for Reuters: “Since the timing and magnitude of the Feds tapering to its QE program is not yet known, market participants will be reading the FOMC minutes closely for implications regarding policy.”

Also coming this week, Existing Home Sales in July are expected to have risen to 5.13 million on Wednesday, up from Junes 5.08 million. On Thursday, last weeks Initial Jobless Claims likely rose by 10 000 to 330 000, while the Markit Flash U.S. Manufacturing PMI for August is projected to have advanced to 54.0 from Julys 53.7. Market players will also be keeping a close watch on this weeks EIA crude oil inventories report and Fridays New Home Sales in July, which are expected to have declined to 0.490 million houses sold, down from 0.497 million in the preceding month.