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US oil closes above $100 on Egypt, inventories

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(Globalpost/GlobalPost)

US oil prices Wednesday settled above $100 a barrel for the first time in more than a year, bolstered by concerns over Egypt and a surprisingly large decline in US crude stockpiles.

US benchmark West Texas Intermediate for August delivery rose $1.64 to $101.24 a barrel. The last time oil closed above $100 dollars was May 3, 2012.

European benchmark Brent futures for August closed $1.76 higher at $105.76.

The political crisis in Egypt continued to propel crude prices higher as traders worried about its impact on the oil-rich Middle East. There were more mass protests in Egypt as an army deadline passed for President Mohamed Morsi to step down.

Late Wednesday, Egypt's army chief Abdel Fattah al-Sisi ousted Morsi and declared the head of the Supreme Constitutional Court caretaker leader.

While not a major crude exporter, Egypt is home to key oil chokepoints like the Suez Canal and the Sumed Pipeline.

"There is a real concern in the oil market about the situation in Egypt, and whether the unrest could spread to the rest of the Middle East," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

"In fact, it's not just Egypt, dealers are closely watching the situation in Libya and Syria as well," he said.

Oil prices were also boosted by the weekly US government oil market report that showed crude stocks declined by 10.3 million barrels, much sharper than the 2.3 million barrel drop expected by analysts in a Dow Jones Newswires survey.

Stocks of gasoline and distillate fuels also came in lower than expected.

The weekly petroleum report was "quite bullish," said Kyle Cooper, managing partner at IAF Advisors in Houston.

Still Cooper called the report an "aberration" after a spate of recent bearish weekly inventory reports. The latest stockpiles report covers a period when some Canadian exports to the US have been halted due to pipeline outages; those exports will soon resume normal deliveries.

Cooper said the oil market is in a bullish mood and predicted crude could soon retreat.

"This has been driven by money flows, not fundamentals," Cooper said.

In recent weeks, WTI has gained ground on Brent as more pipeline and rail capacity has allowed more crude to move from the crude-glutted middle of the US to oil refineries along the coasts.

The spread between the two crudes is now $4.52, down from more than $20 a couple of years ago.

Price increases of Brent have lagged WTI recently as US crudes have displaced Brent crude on the East Coast of the US and as European North Sea output has increased over the last year, said Robert Johnston, an analyst at Eurasia Group.

But Johnston predicted the gap between the two crudes would widen again as US output rises. The Brent-WTI spread "probably will not reach the magnitude seen previously," Johnston said.

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http://www.globalpost.com/dispatch/news/afp/130703/us-oil-closes-above-100-egypt-inventories