World oil prices slid this week, reassured by Egyptian President Hosni Mubarak ouster yesterday after a violent uprising that helped send the crude market to recent two-year peaks.
Cairo’s streets exploded in joy as Mr Mubarak stepped down after three decades of autocratic rule and handed power to military commanders.
In reaction, oil dipped on receding concerns over possible disruption to crude supplies through the strategic Suez Canal, analysts said.
“Initial reaction will be good for risk assets – and this has seen oil, gold and silver slide and equities rise,” said CMC Markets analyst Michael Hewson.
“The key test will be how the military fills the vacuum created by this action, and the effect this has on risk appetite going forward.”
Commodities were also hit this week by worries over Chinese demand, after the nation’s central bank raised interest rates for the third time in four months as authorities fight to tame inflation.
Oil prices dipped, with New York crude tumbling briefly under $86 per barrel yesterday after Mubarak’s resignation was announced, but London Brent prices held stubbornly above the key $100 level.
“As Mubarak decided to step down, geopolitical concerns eased and (New York) crude oil prices retreated toward $86,” said Sucden analyst Myrto Sokou.
The potential shutdown in the operations at the Suez Canal looks very unlikely for the near-term.
Egypt’s Vice President Omar Suleiman announced the handover on state television after an extraordinary national outpouring of rage brought more than a million furious demonstrators onto the streets.
Brent oil prices had rocketed last week to $103.37, striking the highest level since September 26, 2008, on concerns over the impact of Egyptian unrest on global energy supplies, and the possibility of spreading unrest.
SEB Commodity Research analyst Filip Petersson said that Mr Mubarak’s resignation created more uncertainty.
“Uncertainty is the first thing that comes into mind,” Mr Petersson told AFP in response to the news. “The military is officially in control now – even though they have been so all the time – but what will they do?
“My guess is that we will see a military-led dialogue and optimism in the country over the coming weeks. Some of the risk premium in the crude oil market is likely to fade as a result.”
Oil market experts said the unrest, together with large US energy supplies, was helping to maintain a large gap between the prices of Brent and the benchmark New York crude contract.
Crude oil inventories increased by 1.9 million barrels last week in the United States – the world’s biggest oil consuming nation, the Department of Energy said.
By yesterday afternoon on London’s Intercontinental Exchange, Brent North Sea crude for delivery in March fell to $100.75 a barrel from $101.60 a week earlier.