By Jonathan Barratt


As we mentioned at the beginning of the Bulletin, oil prices have taken out significant levels of resistance on the back of concerns in Egypt. We still feel that the world is awash with the commodity with the fundamental picture remaining negative. Even if we take into consideration the developments in Egypt we feel that the recent premium is simply not warranted. Although Egypt has significant reserves of oil, production is negligible. The only issues, we feel, are that the unrest could spread to other neighboring OPEC producers and further could restrict about 4 million barrels a day of production that flow through the Suez Canal. This remains a chance however one that is conjectural for the region given the recent rhetoric from OPEC, developments in Iran and resolutions being tabled for Syria.

It looks like the market is getting jittery as the army deadline for Morsi to solve the insurrection looms [Morsi ousted subsequent to writing - Ed]. This potentially could see Egypt back into a civil war, which would be alarming for the region.