Market Talk

Egypt isn’t one of the world’s largest oil producers, but it is a key point of transit for the global oil trade. Any disruption there could therefore have a big impact on global oil supplies and market.

Newswires David Bird lays out the picture:

As home to the Suez Canal and the Sumed Pipeline, Egypt plays an out-sized role in the world oil market. US Energy Information Administration data show an estimated 1 million barrels a day of crude and refined products flowed north through to the canal to the Mediterranean in 2009, with 800,000 barrels a day heading south to the Red Sea. About 10% of 35,000 ships to transit the canal were laden with oil. Because the canal can’t handle typically large, and ultra-large tankers, the 200-mile Sumed pipeline, jointly owned by Egypt, Saudi Arabia, the UAE and Kuwait, carries a further 1.1 million barrels a day of crude from Suez to the Mediterranean. That’s down from 2.3 million barrels a day in 2007, as the recession hit demand. Closure of the canal or Sumed would cause tankers a 6,000-mile detour around the Africa’s Cape of Good Hope.

Making an oil tanker go 6,000 miles out of its way adds considerably to the cost of transport, as you can imagine. It’s still too early to predict anything about what’s going on in Egypt; it could all be over by Monday. Mubarak could remain in power or get thrown out, the Muslim Brotherhood could take over, democracy could flower. I mean, we just don’t know.

Crude futures are still sharply higher, but off session highs. Now up about 3.3%, to $88.51/barrel. Earlier, they were up more than 4%.

There’s some conflicting reports coming out of Egypt. President Mubarak extended the curfew across the entire nation, the Journal reports, from the big cities of Cairo, Alexandria and Suez. But despite that, nobody’s seems to be paying it much attention. Video clearly shows thousands are ignoring the curfew. A reporter with Al Jazeerza in Suez said both the military and police have left the streets, which are now overrun with protesters.

Police have abandoned Tahrir Square in Cairo, the Journal says. In other shots, though, military vehicles can clearly be seen. The Journal’s also reported that tanks are in the streets in Cairo.

Al Jazeera also is reporting that the headquarters building in Cairo of the ruling National Democratic Party has been set on fire.

The government is still jamming communications, but the Journal reports there is some sporadic use making it through.

“Some phones are working every now and then here and I can get to some Internet websites here, but it is very slow,” said Ahmed Sayed, an Egyptian living in the Nile Delta who was reached by phone, according to the Journal.

The biggest development, though, may be this: people have taken to the streets in Jordan, calling for government reforms, protesting high prices and high unemployment, and calling for the prime minister’s resignation.

So now you have Tunisia, Yemen, Egypt (the region’s most populous nation) and Jordan. Maybe some of these Mideast leaders should keep an overnight bag packed. Just in case.

Given what’s going on in Egypt, and spreading across not only that nation but the Middle East — reports are coming out of Jordan that people are taking to the streets there, too — nobody seems to much care about this morning’s GDP report or earnings.

It’s unfortunate for us that we taped today’s Markets Hub just before the protests in North Africa finally landed on traders’ radar. Since video coming out of Cairo and other Egyptian cities has started to hit CNN, Fox and CNBC, stocks have been cratering. Treasurys have been rallying, and crude has been rising as well. Egypt, after all, is home to the Suez Canal, a critical point for oil supplies (remember 1956?)

Crude futures are up more than 4% at $89.32/barrel, totally reversing in just a couple hours the losses of the past few days. Seems like these exogenous events always come out of left field. Who three weeks ago would’ve predicted a popular uprising in Tunisia that would spread across North Africa like wildfire? I bet most Tunisia’s wouldn’t even have predicted it.

The other thing to keep in mind is that stocks were primed for a sell-off, regardless of what happening in Egypt. The major indexes, the Dow and S&P 500, have been flirting with the 12000 and 1300 marks, respectively. Both were kissed, but not overcome. Markets appears ready for a big sell-off earlier this week, too. So some of this is just traders trying to get ahead of the inevitable, and marking profits now.

But the images coming out of Egypt are breathtaking, no doubt. Here’s today’s Market Hub, US edition:

Thing are getting ugly in Egypt. Here’s two recent reports from Matt Bradley, who’s in Cairo covering the protests live for the Wall Street Journal, which is blogging the news at its Dispatch blog. From the looks of things, it’s getting chaotic and violent. There are reports of a handful of deaths, as of yesterday, at least.

From Bradley:

Police used unrelenting force, including tear gas, rubber bullets and baton wielding plainclothes thugs, at scattered points across Egypt’s capital. Throughout the day, Egypt’s security services were determined to block any pedestrians from entering Tahrir’s square, where the largest protests in recent memory took place Tuesday. The police resistance prevented scattered protests from coalescing into a single group. By early afternoon, the protesters had been unable to reach the square. Hundreds were still trying to make their way from the Nile river island of Zamalek into downtown Cairo, but by 4.30 pm no protester had been able to enter the square.

Here’s another dispatch:

At Cairo’s eminent Al Azhar mosque, the seat of Sunni Islamic learning and one of the oldest institutions of religious teaching in the world,\ regular noon prayers were truncated, running 20 minutes instead of the usual hour and a half. Security officials said they had strict instructions not to allow loitering outside the mosque following prayers. “We will use force to disperse the people. We are not going to just let them walk the street,” said one plainclothes officer. As worshipers filed out of the service under heavy security, a chant of “Allahu Akbar” or “God is great” rose from the exiting crowd. Once the mass of about 500 left the mosque, the chant changed. “The people want the regime to go,”  the crowd chanted, along with “Punish those people” a reference to the government.

Addendum: If you want to follow this live, Al Jazeera (English language version) is broadcasting this live on its website. Not sure how that would be affected by the reports that the government’s shutting down just about everything, but the site’s broadcasting from Cairo right now.

Premarket US stock futures currently point to a flat open, though that could shift after our first look at 4Q GDP, due at 8:30 a.m. ET. Earnings reports should also provide some influence, with Chevron due before the open, and investors showing disappointment with Ford’s fresh results, shares down 7% premarket.

Investors also peeved by Amazon’s outlook for higher costs and lower 1Q profits; AMZN down 8.5% premarket. Microsoft shares flat ahead of the open after solid results, though there’s some quibbles with Windows revenue.

In addition to GDP, we’ll also see Reuters/Univ of Michigan final look at January consumer sentiment at 9:55 a.m.

S&P futures up 0.20, DJ futures up 3. Ten-year lower, yield at 3.41%.

Newswires Kevin Kingsbury had this take on Ford’s earnings:

Ford (F) slides 7.4% premarket to $17.40 as company reports weaker 4Q results as prior-year figures were boosted in part by an earning surge at its credit arm, largely due to lease residual gains one analyst at the time called “unsustainable.” Still, F says earnings excluding debt-related and other charges was 30c, well short of 48c Street estimate and last year’s 43c profit. Revenue fell less than expected, with the decline due to selling Volvo in mid-2010. F shares through Thursday were up 65% the past year.