WTI Crude Fluctuates as Oil Flows Unimpeded Through Suez Canal

July 8 (Bloomberg) — West Texas Intermediate crude fluctuated near a 14-month high as U.S. equities climbed while ship traffic in Egypt’s Suez Canal continued to move at a “normal” pace even as violence escalated in Cairo.

WTI traded in a $1.99 range as stocks advanced and the dollar retreated against most of its peers. Tarek Hassanein, a Suez Canal Authority spokesman, said that 55 ships are scheduled to pass through the channel. Prices topped $104 a barrel today as Egyptian security forces fought with supporters of ousted President Mohamed Mursi, leaving more than 50 dead.

“There’s tension in the market today,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Equities are higher and the dollar is off its highs, which is sending a mixed message. In Egypt, there continues to be unrest, but oil keeps flowing through the Suez Canal.”

WTI crude for August delivery increased 16 cents to $103.38 a barrel at 12:45 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 20 percent more than the 100- day average. Earlier it rose to $104.12, the highest intraday level since May 3, 2012.

Brent oil for August settlement decreased 26 cents to $107.46 a barrel on the London-based ICE Futures Europe exchange. The volume for all contracts was 4.9 percent below the 100-day average. The European benchmark grade traded at a $4.08 premium to WTI, down from $4.50 on July 5.

The Standard & Poor’s 500 Index rose 0.4 percent and the Dow Jones Industrial Average gained 0.5 percent. The Dollar Index, which measures greenback against the currencies of six major U.S. trade partners, fell from a three-year high. A weaker dollar bolsters the appeal of commodities denominated in the U.S. currency as an investment.

Suez Traffic

A combined 2.24 million barrels a day of oil were shipped to Europe and North America in 2011 through the canal and Suez- Mediterranean Pipeline from the Red Sea, according to the U.S. Energy Information Administration. The Middle East accounted for 35 percent of global oil output in the first quarter of this year, International Energy Agency data show.

“Traffic on the Suez Canal has been unaffected by the unrest in Egypt,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “There’s relief that the traffic is still moving. There won’t be a major fall in prices because the situation could spiral out of control at any moment and threaten the flow of oil.”

Divided Country

The military deposed Mursi on July 3, a year into his term, after popular discontent with his leadership culminated in days of protests against him. The flaring violence threatens to deepen political polarization and derail efforts by the country’s interim leaders to form a government.

BP Plc, BG Group Plc and Eni SpA have removed non-essential staff from Egypt, officials at the companies said, while Royal Dutch Shell Plc said it temporarily relocated some workers and dependents. Oil and gas output hasn’t been affected by unrest, the companies said. Egypt produced 728,000 barrels of oil a day in 2012 and 60.9 billion cubic meters of natural gas, BP said.

Libyan oilfields and ports are back to normal after sit-ins that had stopped some production and loading, the state-owned Libya News Agency said today, citing an official it didn’t identify.

WTI futures also slipped after a technical indicator signaled that prices have advanced too quickly. The 14-day relative strength index rose above 70 on July 5, according to data compiled by Bloomberg. Investors typically start selling contracts when the reading is more than 70, a sign a market is overbought.

“The RSI shot above 70, which implies an overbought situation,” Yawger said.

– Mark Shenk, Copyright 2013 Bloomberg.