On 1 February, thousands of opponents of President Mohamed Mursi returned to the streets of Egypt, demanding his overthrow after the deadliest violence of his seven months in power. Protests turned violent. Protesters threw petrol bombs and stones at the British Embassy in Cairo while several thousand people gathered in Tahrir square. There were sporadic clashes with the police in Cairo earlier, and several protesters were injured by rubber bullets.
Egypt‘s perpetual turmoil, the hostage crisis in Algeria, the bloody civil war in Syria and the situation surrounding Iran’s nuclear programme, have sustained the risk premium and the oil price appears to be under no short-term pressure.
“There is no doubt that political unrest affects significantly oil prices,” Energean Oil & Gas Chairman and CEO Mathios Rigas told New Europe on 30 January on the sidelines of an IENE forum in Athens that discussed the effects of the “Arab Spring” on the oil market.
If the political unrest in Egypt moves on to other places like Algeria and it sparks further problems, then there is no doubt that there will be further spikes in the oil price, Rigas said. “Having said that there are a lot of investments happening in Egypt at the moment that are not affected by what is happening in the problem zones so I think there are other issues more important than what is happening in Egypt today that affects oil prices,” he said.
On 1 February, Brent oil prices struck a fresh three-month high, boosted by the weak dollar and Chinese data, as traders awaited key economic figures in the US. In early afternoon London deals, Brent North Sea crude for delivery in March rallied to $115.97 per barrel -- the highest level since 15 October.
Rigas said there are projections that oil prices may increase further if violence expands beyond Egypt. Rigas, whose company is drilling in Egypt, said Energean Oil & Gas is concerned about the security of its employees. “We are concerned about what’s happening in Egypt, there is no doubt about that, and we are very much concerned about the security of our people primarily and the stability with respect to the concession agreements we have with the government,” he said. “We are drilling a well as we speak and we are continuing to invest in the country despite the problems,” he added.
Rigas said countries like Egypt and Greece that face similar financial problems and Cairo, which faces political problems, have a long history and they will overcome these difficulties. “The companies that stay there and persist will be the ones that will win the confidence of the countries and will continue to gain business out of these countries,” the Energean Oil & Gas CEO said.
Oil prices are dictated by what is happening not only in Egypt and North African countries but by what is happing in the demand side. Constraints and ample supply could lower oil prices. “There’s a factor that will no doubt affect oil prices going forward and that is what will happen with shale oil coming out of the US,” Rigas said. In the years to come the US will become a net exporter of crude and that will significantly change the dynamics of the oil markets.
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