NEW YORK (TheStreet) -- Political unrest in Egypt and fears that the strife would spread throughout the Middle east continue to send the price of oil higher on Monday. Brent crude oil surpassed the $100 mark for the first time since October 2008 in Monday trading, while in the U.S. the price of crude oil touched above $90. Exxon Mobil (XOM) reported strong earnings on Monday morning and cited global economic stabilization in its outlook, but the action in the oil trade on Monday was more closely linked to the continued uncertainty in the Middle East. There was also a macroeconomic bet that even in the face of higher interest rates, China's growth will continue to keep oil demand at a high level, that sent both the price of crude and energy stocks higher.
The energy sector was up more than 2% on Monday, after the big equities selloff to end the week last Friday.
Fears that the Suez Canal would be shut down as a result of the Egyptian political crisis hadn't materialized on Monday, and Raymond James analysts equated the "Middle East Contagion" theory to Cold War rhetoric.
Raymond James date noted that Egypt is responsible for 0.8% of the global oil supply. The Suez Canal is responsible for providing a gateway for less than 5% of global oil supply, and OPEC has indicated that it can raise production to make up for any impact from the Egyptian crisis on global oil supply."Last Friday's nearly$4/Bbl jump in oil prices reflects the oil market's fear that Egypt's turmoil could spread eastward, toward Saudi Arabia and the rest of the Gulf oil producers. This is the modern-day equivalent of the Domino Theory. During the Cold War, especially in the early years, Western geostrategy was based on the idea that if one country falls to communism, its neighbors will be at risk of following suit. So, for example, if Vietnam turned communist, then it would be Thailand, then Indonesia, and finally Australia and even the U.S. West Coast would be threatened." The Raymond James analysis continued, "Of course, as we know from history, things didn't actually work out that way. The same is true of Middle Eastern politics. A power shift in Egypt -- even in the remote scenario of an Islamist takeover -- does not mean that Saudi Arabia will be next." Raymond James contends in its Monday report that even in the event that President Mubarak is ousted, an Islamic takeover in Egypt is not likely; regime change in Egypt carries a limited read-through for the Persian Gulf; and the risk to foreign oil and gas assets in Egypt should not be overstated.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV