Oil Rises on Egypt as U.S. Stocks Fall

Oil Rises on Egypt as U.S. Stocks Fall; Euro Weakens on Trichet

By Stephen Kirkland

Oil advanced for a fifth day after protests in Egypt turned violent and unrest spread to Yemen. Photographer: Phil Weymouth/Bloomberg

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Feb. 3 (Bloomberg) -- Shokri Ghanem, chairman of the state-owned Libya National Oil Corp., talks about oil supplies amid unrest in Egypt and prospects for an output increase by the Organization of Petroleum Exporting Countries. He speaks with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)

Oil rose for a fifth day after protests in Egypt turned violent and unrest spread to Yemen, while U.S. stocks fell. The euro weakened as European Central Bank President Jean-Claude Trichet said inflation risks were broadly balanced, damping prospects for higher interest rates.

Brent crude, the benchmark grade for two-thirds of the world’s oil market, climbed as much as 1 percent to $103.37 a barrel, the highest in 28 months, before trading at $102.78 at 9:44 a.m. in New York. The Standard & Poor’s 500 Index dropped 0.2 percent while the Stoxx Europe 600 Index swung between gains and losses. The cost of insuring against default by Egypt rose for a second day. The euro slid 1 percent against the dollar.

Gunfire erupted early today in Cairo’s Tahrir Square after supporters of Egyptian President Hosni Mubarak battled with demonstrators demanding an immediate end to his 30-year reign. Tens of thousands of Yemeni pro- and anti-government protesters inspired by uprisings in Tunisia and Egypt flooded the capital city of Sanaa.

“All eyes in the oil market are on the riots and protests in Egypt right now,” said Robert Montefusco, senior broker at Sucden Financial in London. “That’s keeping prices strong, though there hasn’t been any disruption to supplies.”

West Texas Intermediate oil gained 0.7 percent to $91.49. Cotton climbed to 2.6 percent to $1.8074 a pound in New York. The S&P GSCI Total Return Index of 24 commodities rose as much as 0.4 percent to 5,141.5, the highest since November 2008 on a closing basis. Copper rallied as much as 0.6 percent to $10,000 a metric ton, before trading at $9,940.

Shell, Total

Merck & Co. fell 3.3 percent. The second-biggest U.S. drugmaker forecast 2011 earnings that missed analyst estimates and posted a fourth-quarter loss after taking a $1.7 billion charge to write down its experimental blood thinner. Dow Chemical Co., the largest U.S. chemical maker, posted fourth- quarter earnings that rose more than analysts estimated. The shares rose 0.5 percent.

About 72 percent of the S&P 500 companies that have announced results since Jan. 10 topped analysts’ estimates for per-share earnings, according to data compiled by Bloomberg.

Service industries in the U.S. probably kept growing in January at the fastest pace in more than four years, showing the recovery broadened as the year began, economists said before a report due at 10 a.m. New York time. Data from the Labor Department showed new claims for unemployment benefits dropped by 42,000 to 415,000. Economists forecast claims would fall to 420,000, according to the median estimate in a Bloomberg survey.

Shell, Total

About three shares declined for every two that rose in Europe’s Stoxx 600. Royal Dutch Shell Plc fell 3.7 percent after posting earnings that missed estimates. Total SA, which owns about 40 percent of Yemen LNG, a liquefied natural-gas venture in the poorest Arab country, slid 1.7 percent. Deutsche Bank AG gained 1.8 percent after saying higher trading reevenue lifted fourth-quarter earnings. BT Group Plc jumped 3 percent after profit beat estimates.

The cost of insuring Egyptian sovereign debt rose, with credit-default swaps climbing 11 basis points to 388.5, according to CMA. Orascom Construction Industries, Egypt’s largest publicly traded company, fell 1.6 percent in London. Egypt’s stock market was closed for a fifth day.

Egypt had its long-term foreign currency issuer default rating cut to BB from BB+ by Fitch Ratings. The rating may be cut further, Fitch said.

The MSCI Emerging Markets Index gained less than 0.1 percent. Reliance Industries Ltd., owner of the world’s biggest oil-processing complex, led the Bombay Stock Exchange Sensitive Index 2 percent higher. Markets are shut for Lunar New Year holidays in China, Taiwan, South Korea, Malaysia, Indonesia and Vietnam.

Euro Weakens

Europe’s single currency weakened against all but one of its 16 major counterparts. Trichet told reporters the central bank has to remain “alert” on inflation. Policy makers kept their benchmark interest rate at a record low of 1 percent today, matching the prediction of all 58 economists in a Bloomberg survey.

The Australian dollar gained versus all 16 of its major counterparts as data on building permits and trade pointed to a resilient economy. The so-called Aussie added 0.2 percent versus the dollar and 0.5 percent against New Zealand’s currency.

Spanish 10-year bonds declined, pushing the yield up eight basis points to 5.18 percent, as the nation issued 3.5 billion euros ($4.8 billion) of three-year and five-year notes. Spain auctioned 1.89 billion euros of the three-year debt at an average yield of 3.25 percent, down from 3.72 percent at a sale in December.

U.S. 10-year Treasury notes fell, with the yield adding two basis points to 3.50 percent, while two-year yields climbed three basis points to 0.70 percent. German bonds were also little chaDKK Curncynged, with the 10-year yield three basis points lower at 3.23 percent.