The canal and parallel SuMed pipeline are both vulnerable, and their closing would send oil prices skyward
Egyptian troops have reinforced the guards protecting the Suez Canal and the Suez-Mediterranean oil pipeline running alongside it, according to an official with knowledge of the buildup. Energy consultancy IHS CERA figures that more than 1.7 millions barrels of crude pass through the canal and the "SuMed" each day. The SuMed takes oil from large tankers that cannot navigate the canal when fully loaded and delivers it to empty tankers waiting off Egypt.
An act of sabotage or a decision by a new regime to close the canal and the pipeline to punish supporters of Egyptian President Hosni Mubarak could send oil prices sharply upward. From 1967 until 1975, Egypt kept the canal closed in response to Israel's seizure of Arab territory, forcing tankers to travel around the Cape of Good Hope. Today disruption of the SuMed would have a bigger impact on the oil and shipping markets than a shutdown of the canal itself, Eri Nikolai Stavseth, an analyst at Arctic Securities in Oslo said in a report on Jan. 31.
The bottom line: Investors worry that the flow of oil through the Suez Canal will be disrupted by the Egyptian uprising. So far the canal has stayed open.