BUSINESS

Oil just under $98 as Egypt protests raise supply concerns

Pablo Gorondi The Associated Press
Published Monday, July 1, 2013 9:25AM EDT Last Updated Monday, July 1, 2013 4:25PM EDT

The West Hercules drilling rig in the Skaanevik fjord in western Norway is seen in this April 26, 2013 photo. (Scanpix / Statoil)

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NEW YORK -- The price of oil gained 1.5 per cent and finished just below $98 a barrel Monday on rising concerns about Middle East tensions and their possible impact on oil supplies.

Some analysts speculated that the higher price also reflects some traders' expectations that weekly oil supply data due Wednesday will show a sizeable drop.

Benchmark crude for August delivery rose $1.43 to close at $97.99 a barrel on the New York Mercantile Exchange. Oil was as high as $98.28 in the morning.

Protests in Egypt aimed at ousting Mohammed Morsi, the country's first democratically elected president, continued Monday. Traders were concerned that the protests in Egypt and the civil war in Syria could affect the production and transport of oil supplies in the Middle East and North Africa.

In London, Brent crude gained 84 cents to end at $103 a barrel on the ICE Futures exchange.

Brent, the benchmark for international crude oil, tends to react more strongly to potential disruptions to Middle East supplies. For some analysts, the sharper gain in the U.S. benchmark suggested that some traders are looking for news from the Energy Department of a big drop in U.S. supplies.

"We are looking for a total crude supply draw of around 3 million barrels (per day in) Wednesday's EIA report but we wouldn't be surprised by a significantly larger decline," wrote Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, in a note to clients.

Reports on manufacturing in the world's two biggest economies gave opposite impressions.

U.S. manufacturing activity grew in June behind a pickup in new orders and stronger production. The increase suggests factories could rebound in the second half of the year and help the economy grow.

Meanwhile China's manufacturing sector weakened again in June amid a credit crunch and slower U.S. and European orders, two surveys showed. The findings added to signs that growth in the world's second-largest economy is decelerating.

U.S. drivers continue to pay less to fill up. The nationwide average for a gallon of gasoline fell below $3.50 a gallon for the first time since early February. At $3.49 a gallon, gas is about 12 cents cheaper on average than a year ago, although it still costs about 16 cents a gallon more than at this time last year.

In other energy futures trading on Nymex: