The price of oil climbed above $107 a barrel Thursday as the escalating violence in Egypt was seen as threatening stability in the Middle East, and U.S. crude supplies fell in a possible sign of stronger demand.
By early afternoon in Europe, benchmark crude for September delivery was up 48 cents to $107.33 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 2 cents to close at $106.85 on Wednesday.
The Egyptian Health Ministry said that 525 people had died so far and over 3,700 were injured in clashes between police and supporters of ousted Islamist President Mohammed Morsi. The government declared a nationwide state of emergency and a nighttime curfew. Nobel Peace Prize winner Mohamed ElBaradei resigned as Egypt's interim vice president in protest at the violence.
"The situation in Egypt deteriorated significantly (Wednesday)," analysts at Commerzbank in Frankfurt said in a report. "This makes any return to a more peaceful situation in this country — which plays a key role in the entire region's stability — impossible."
Egypt controls the Suez Canal and the nearby Sumed pipeline. While these crucial transport routes for Middle East oil are not expected to be hampered, Commerzbank analysts said "the risk premium is nonetheless likely to rise following the latest events."
Analysts also noted the large drop in Libya's oil output, which, at around 650,000 barrels a day, was about 1 million barrels a day lower than a year ago due to field closures and export disruptions. "Libya is more of a concern for the oil markets than Egypt," said Olivier Jakob of Petromatrix in Switzerland. "As long as Libya does not return to exporting crude oil it will difficult for markets to significantly weaken."
In the United States, meanwhile, the latest supply reports showed a drop in crude inventories, with the U.S. Energy Department saying supplies fell by 2.8 million barrels, about double what analysts expected.
Brent crude, traded on the ICE Futures exchange in London, was up 81 cents to $109.63 a barrel. In other energy futures trading on Nymex: — Heating oil rose 1.77 cents to $3.0655 a gallon. — Wholesale gasoline added 1.11 cents to $2.8588 a gallon.
— Natural gas fell 1.6 cents to $3.326 per 1,000 cubic feet.
Pamela Sampson in Bangkok contributed to this report.