Egypt turmoil pushes crude oil price over $100 a barrel

Fears that the turmoil in Egypt could disrupt oil shipments passing through the Suez canal and engulf the Middle East drove the price of Brent crude oil through the $100 barrier for the first time in over two years.

The price of a barrel of the benchmark Brent crude soared by more than $1.50 to as high as $101.08 a barrel as the protests against President Hosni Mubarak's regime intensified. Prices are now at their highest since September 2008, at the start of the financial crisis.

Abdullah Al-Badri, secretary general of Opec, the cartel of oil producers, expressed concern about the situation in Egypt and added that Opec did "not want 2008 to be repeated", referring to when oil prices hit a record $147. But he said the cartel would not increase production on the back of the surge in prices as he believed there was no shortage of oil.

Since August, oil prices have been steadily increasing from around $70 on the back of higher demand as the global economy recovers from the downturn, fuelling inflation.

The latest rise in oil prices will put further pressure on the British government to head off a rise in fuel duty planned for April.

David Cameron gave the latest hint in an interview with the BBC this morning that the budget on 23 March could include a "fuel stabiliser" which would cut the level of fuel duty motorists have to pay when oil prices rise.

Last week the price of diesel at the pump in the UK reached a new high,hitting 133.26p a litre on average.

The price of fuel is a concern for the government as it was one of the reasons for the rise in inflation, measured by the consumer price index, in December. In turn, higher inflation could put pressure on policy makers to hike interest rates.

Egypt is not a major oil producer but it controls the 120-mile Suez canal and the 200-mile Suez-Mediterranean pipeline which together carry about 2m barrels of oil each day, about 2.5% of demand globally. No major disruption to supplies has been reported after almost a week of violent protests although some ports' operations have been slowed.

Analysts said that oil prices were rising on concerns that the turmoil could spread into neighbouring countries or even major oil producers further afield, such as Saudi Arabia. The unrest in Egypt follows the recent overthrow of the regime in Tunisia, adding to the nervousness that more chaos could engulf the Middle East, which accounts for almost a third of the world's oil production.

The Egyptian authorities have said that the Suez canal is operating normally, with armed guards protecting the crucial waterway linking the Red Sea and the Mediterranean. Barclays Capital warned that some ships could be attacked if the situation deteriorates and that if a radical anti-western government seized power it could close the canal.

If the canal was unavailable oil tankers would have to sail around Africa to transport oil from the Middle East to America – an extra 6,000 miles.

"We cannot ignore the possibility that the chaos will spill over from Egypt into oil-producing nations," said Kenji Sekiguchi of Mitsubishi UFJ Asset Management.

Badri said Opec ministers would discuss whether they needed to pump more oil to bring down prices at an energy conference in Saudi Arabia later this month but said a formal decision to increase production quotas was unlikely. Opec's next formal meeting takes place in June.