Oil hits $104 amid fresh Suez Canal fears

From [HERE] Brent crude oil has soared to $104 dollars a barrel amid fresh concerns over the Suez Canal in the Middle East. The price of the commodity surged after Avigdor Lieberman, the Israeli foreign minister, announced two Iranian warships planned to sail through the Suez Canal - a major transport route for oil - to Syria, the Telegraph reports.

Lieberman dubbed the plans a "provocation" by Iran, while posing a major threat due to the country's nuclear arms programme.

However, the Suez Canal Authority's head of traffic Ahmed El Manakhly said he had not been told about any Iranian warships with plans to travel through the waterway. In order to pass through, military ships must first gain permission from the government's ministry of defence and foreign affairs.

The latest fears follow shortly after turmoil in Egypt, which saw the price of Brent crude rally to a 28-month high just above $103 at the beginning of February.

Israeli leaders have also aired fears Iran may exploit the transitional period in Egypt, following Hosni Mubarak's departure.

Unrest in Libya further compounded concerns the type of political events that overturned the presidents of Egypt and Tunisia could spread to other oil-rich nations in the region.

BlackRock's Robin Batchelor, manager of the BGF World Energy fund, says although many are focusing on political events as the driver of the recent oil price strength, there are also more fundamental issues at work.

He believes oil markets are in the early stages of a new upward cycle based on a range of factors. Oil supply growth is struggling to keep pace with increasing demand across all regions, while inventories and Opec spare capacity are showing signs of trending lower.

Energy equities are also trading at attractive multiples, leaving potential for positive earnings momentum and upwards earnings revisions.

He says: "Considering this backdrop, investors should carefully consider the sector's long-term potential. In our view, 2011 is shaping up to be the year that energy returns to form, and that will provide significant opportunities with which to invest."