As the civil unrest and ensuing riots in Egypt dominated the headlines this week, Wall Street has been focused on how the situation may affect the oil markets. Egyptian unrest in the past days helped drive Brent crude above $100 for the first time since 2008. There is concern that tensions in Egypt may affect other countries in the Middle East.
One of our energy holdings, Apache Corporation (NYSE: APA), has about 26% operations production in Egypt. While this is some concern, Apache’s oil fields are in a remote location in the Western Desert, and thus far, operations have continued uninterrupted. Apache shares were up 1.74% for the week, although it remains -4.7% lower since the January 25th inception of the unrest.
Wall Street analysts’ other concern is if Egypt were to close the Suez Canal, it could send oil prices skyrocketing. Crude oil could be shipped around Africa adding near 6,000 miles to the trip. This route would also take oil tankers around Somalia into areas where Somali pirates have caused trouble for cargo ships in the past. We believe that many nations will see that the flow of oil is not disrupted.
We would like to see a smooth transition for Egypt. Politically, Egypt has been a good ally to the United States. Economically, the nation has also received a considerable amount of foreign aid from our country. Egypt is one of the largest importers of U.S. wheat, so it is not surprising that we have seen wheat costs rise this week. We feel the United States has a good economic pull over the current Egyptian administration, and will use that influence wisely.