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Oil prices stays above $101 after jerked higher by Egypt unrest, drop in US stockpiles

The price of oil stayed above $101 a barrel Thursday after being jerked higher by unrest in Egypt and a fall in U.S. energy stockpiles that suggests a recovery in demand.

Benchmark crude for August delivery was up 16 cents to $101.40 at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract gained $1.64 to $101.24, its highest close since May 3, 2012, on Wednesday. Nymex floor trading is closed Thursday for the Independence Day holiday.

Two events propelled the price of oil higher in the past day: unrest in Egypt and a big drop in U.S. 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 Wednesday night local time that Morsi will be replaced and new elections will be held.

Egypt is not an oil producer but its 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 percent 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.

In the U.S., 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, 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 U.S. demand is rising.

Brent crude, which is used to set prices for oils used by many U.S. refineries, was down 26 cents to $105.50 on the ICE exchange in London.