LONDON—Global oil prices rallied today, with New York crude hitting a 14-month peak on concerns that the political crisis in Egypt could affect the rest of the Middle East and disrupt global supplies, analysts said.
The market also pushed higher on indications of strong U.S. oil demand, ahead of the latest weekly inventory update in the world's top crude consuming nation.
In Asian trading hours, New York's main contract, West Texas Intermediate (WTI) light sweet crude for August, surged to $102.18 per barrel—which was last seen on May 4, 2012.
The contract later trimmed gains to stand at $101.07, up $1.45 from Tuesday's closing level.
Brent North Sea crude for delivery in August rose 79 cents to $104.79 per barrel in late morning deals in London.
"Market participants attribute the WTI price trend to the escalation of the situation in Egypt—the army's ultimatum for President Mursi runs out today—and to the sharp decline in U.S. crude stocks reported yesterday evening after close of trading by the [American Petroleum Institute]," Commerzbank analysts said.
On Tuesday, the American Petroleum Institute published data that showed a steep drop in crude inventories. The API forecast that crude stockpiles had tumbled by 9.4 million barrels last week.
Inventory Drop Expected
Later today, the U.S. government's Energy Information Administration will publish its inventory data for the same period.
Market expectations are for a drop of 2.3 million barrels in the week to June 28, according to analysts polled by Dow Jones Newswires.
The oil market had meanwhile spiked higher on Tuesday on fears over the impact of unrest in Egypt.
"There is a real concern in the oil market about the situation in Egypt, and whether the unrest could spread to the rest of the Middle East," said Michael McCarthy, chief market strategist at CMC Markets in Sydney. "In fact, it's not just Egypt, dealers are closely watching the situation in Libya and Syria as well."
Markets are keenly watching the fluid situation in Egypt after Islamist President Mohamed Morsi on Tuesday resisted mass protests calling for his resignation, citing the fact that he had been freely elected last year.
As the army hinted at possible intervention, clashes broke out on Tuesday between allies and opponents of the embattled president. Several top administration officials have resigned.
Traders are concerned that unrest in Egypt could hit crude shipments through the Suez Canal, which provides 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 canal carries about four million barrels daily, roughly equal to 13% of the output of cartel OPEC.
Copyright Agence France-Presse, 2013