Commodities: Egyptian bloodbath threatens crucial routes for oil and gas supplies…(Prepare Yourselves!)
Egypt is a key bottleneck in the global oil industry. Should the current turmoil in the North African country get any worse, a potential oil spike could damage any nascent economic recovery.
By Garry White, and Emma Rowley
18 Aug 2013
After last week’s bloody crackdown by the Egyptian army, fears of a disruption of oil supplies to the West have boosted the oil price. Brent crude prices were propelled to a four-month high of $111.23 on Thursday. If the turmoil gets worse – or unrest spreads to other countries – the risk premium currently factored into the price of crude is likely to increase further.
Egypt is not a major energy exporter, producing a nominal amount of the world’s oil and gas. The North African country appears at number 54 on the list of the world’s largest oil exporters, producing about 0.9pc of the world’s oil and 1.8pc of global natural gas supply.
However, Egypt plays a vital role in international energy markets through the operation of the Suez Canal and the Suez-Mediterranean (Sumed) pipeline. These are vital pieces of infrastructure in the global oil market.
Last year, about 7pc of all seaborne traded oil and 13pc of liquefied natural gas (LNG) travelled through the Suez Canal, according to data collected by the US Energy Information Administration (EIA).
The Suez Canal, a 101-mile link between the Red Sea and the Mediterranean, and the 200-mile Sumed pipeline are strategic routes for Persian Gulf oil and gas shipments to Europe and North America.