Oil climbs to near $87 as Egypt unrest escalates

Oil prices rose to around $87 a barrel Friday as Egyptian President Hosni Mubarak clung to power amid growing protests calling for his resignation.

By early afternoon in Europe, benchmark crude for March delivery was up 25 cents at $86.98 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 2 cents to settle at $86.73 on Thursday.

In London, Brent crude gained 61 cents to $101.48 a barrel on the ICE Futures exchange.

Mubarak, in power for 30 years, said late Thursday that he would pass some authority to his vice president but would not immediately leave office. Protesters seeking to oust Mubarak were massing in Cairo's central square on Friday, posing a major test for the military as the demonstrators stepped up calls for the army to intervene against the president.

"Prices are likely to sell off once it becomes clear that Mubarak is in fact on his way out," said a report from MF Global in New York. "Thursday's action hinted at just such a possibility, but we seem to have postponed the sell-off for some time longer in light of Mubarak's unanticipated U-turn."

Egypt is not a major oil producing country, but it controls the Suez Canal and a nearby pipeline. Egypt's political crisis, which is in its 18th day, hasn't disrupted oil supplies but is still disquieting traders.

"Sufficient spare shipping capacity and marginal additional costs of rerouting barrels around the southern tip of Africa should keep supplies ample," said analysts at JBC Energy in Vienna. "However, the uncertainty caused by the whole situation is racking up oil markets."

Traders also are concerned the upheaval could spread to other countries in the oil-rich region.

"There are renewed fears that the events in Egypt will be copied elsewhere throughout the Middle East," Cameron Hanover said in a report. "The possibility of other countries in the region coming under similar assaults seems to grow."

In other Nymex trading in March contracts, heating oil rose 0.43 cent to $2.715 a gallon and gasoline gained 0.87 cent to $2.4785 a gallon. Natural gas futures were down 3.6 cents at $3.95 per 1,000 cubic feet.