NEW YORK — The price of oil rose to its highest level in 14 months on concerns about possible disruptions to Middle East supplies and signs of an increase in United States demand for fuel.

US benchmark oil gained US$1.64 (S$2.09) to US$101.24 (S$128.90), its highest close since May 3, 2012.

Brent crude, which is used to price oil used by many US refineries to make gasoline, rose US$1.76 to finish at US$105.76.

Two events propelled the price of oil above US$100 a barrel for the first time since the middle of September: unrest in Egypt, and a big drop in US oil supplies.

Traders were worried that political upheaval in Egypt could slow the flow of oil from the Middle East to world markets.

Embattled Egyptian President Mohammed Morsi vowed not to give in to protesters’ demands for his resignation. But the head of Egypt’s military announced late last night (July 3) local time that Mr Morsi will be replaced and new elections will be held.

Egypt is not an oil producer but it control of one of the world’s busiest shipping lanes gives it a crucial role in maintaining global energy supplies.

The Middle East accounts for about a quarter of the world’s crude oil output, or 23 million barrels per day. About 2 million barrels of that, or 2.2 per cent of world demand, are transported daily through the Suez Canal, which links the Mediterranean with the Red Sea. Much of that oil is headed to Europe, but a supply drop anywhere in the world leads to higher prices everywhere.

“Markets tend to advance sharply on uncertainty and will often price in a worst case scenario. This appears to be the case with the unfolding situation in Egypt,” wrote Mr Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, in a note to clients.

Some analysts suggested market reaction to the political crisis in Egypt was exaggerated.

“If there is one thing that the military has control of in Egypt it is the Suez Canal. We therefore do not see a significant risk for free passage on the waterway,” said Mr Olivier Jakob of Petromatrix in Switzerland.

In the US, the Energy Department reported Wednesday that crude supplies fell by 10.3 million barrels from the previous week, more than three times the drop that analysts had expected.

The drop was likely the result of reduced supplies from Canada because of a temporary pipeline shutdown there, as well as increased demand from a BP refinery that restarted in Indiana.

Gasoline supplies fell as well, while analysts expected an increase. The drop in oil and gas supplies could be an indication that US demand is rising.

The rising price of oil could end what has been a streak of 21 days of lower US retail gasoline prices. The average US pump price fell less than a penny Wednesday to US$3.48 per gallon.

Analysts do not think the spike in oil prices will lead to sharply higher gasoline prices, though, because US crude supplies remain high and refineries are turning out plenty of gasoline. AP