Oil prices rose on Wednesday as worries persisted that upheaval in Egypt could spread across the Middle East and North Africa, source of a third of the world's supply of crude. Prices had lost some steam earlier after the dollar rebounded as nervous investors sought a safe haven and as data showed US crude stockpiles rose for a third straight week.
"While the oil market wants to move lower on the bearish (inventory) data, it can't break away from worries about Egypt," said Phil Flynn, analyst at PFGBest Research in Chicago. "The latest pictures of Egyptian demonstrations becoming violent have added to those worries," Flynn said. US March crude settled 9 cents higher at $90.86, bouncing off a session low of $90.10.
ICE Brent crude for March delivery traded up 60 cents at $102.34 a barrel by 2:38 pm EST (1938 GMT). In earlier trade it touched $102.36, the highest for a front-month contract since September 2008. Brent's premium against the US crude benchmark, West Texas Intermediate, remained wide at more than $11 a barrel, gaining from $10.97 at the close on Tuesday.
Part of Brent's strength stemmed from rising US stocks at the key storage hub in Cushing, Oklahoma, the delivery point for oil futures traded on the New York Mercantile Exchange. Stockpiles at the hub rose 667,000 barrels last week to a record 38.33 million barrels, data from the US Energy Information Administration showed. That was a portion of the total 2.6-million-barrel increase last week in US crude inventories, the third straight week that supplies have risen.
A massive winter storm, meanwhile, brought parts of the Midwest to a standstill and delivered another wintry blow to the Northeast, the biggest market for heating oil. The US March heating oil contract was up 2.46 cents at $2.7816 a gallon, having hit a session peak of $2.7861, the highest for a front-month heating contract since October 2008.
Egyptian President Hosni Mubarak has said he will surrender power in September, angering protesters who sought an immediate end to his 30-year rule. In sporadic skirmishes, Mubarak's supporters attacked protesters, further muddling the already explosive situation.
The United States, France, Germany and Turkey have urged Mubarak to carry out a speedy transition, but the president has dug in his heels. A Foreign Ministry statement said those calls aimed to "incite the internal situation" in Egypt. Analysts expect oil markets to head higher unless the unrest in Egypt subsides. "We suspect that the (as) yet unresolved political stand-off in Egypt will likely keep oil prices fairly well bid, at least for the balance of the week," said Edward Meir, senior commodities analyst at brokers MF Global. Credit Suisse analysts agreed, saying price risks would remain "skewed to the upside" as long as geopolitical tensions in Egypt remained unresolved: "We expect oil prices to ease once tensions fade due to ample global inventories."