Oil prices slip as Mubarak resigns

11th February 2011, Comments 0 comments

World oil prices slid on Friday and European stock markets bounced following news of the resignation of Egyptian President Hosni Mubarak after a successful two-week uprising.

Brent North Sea crude for delivery in March sank to $100.43 per barrel, before pulling back to $100.75, down 12 cents from Thursday's closing level.

New York's main contract, light sweet crude for March, tumbled as low as $85.62, but later stood at $86.13, down 60 cents.

Cairo's streets exploded in joy as Mubarak stepped down after three decades of autocratic rule and handed power to a junta of senior military commanders.

In reaction, oil dipped on receding concerns over possible disruption to crude supplies through the strategic Suez Canal, analysts said.

"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."

Meanwhile, the London stock market rallied, ending the day 0.71 percent higher. Frankfurt won 0.42 percent and Paris gained 0.15 percent, mirroring a modest bounce on Wall Street.

"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.

"Once the hullabaloo has died down, though, 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."

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.

"Taking into consideration the difficult circumstances the country is going through, President Mohammed Hosni Mubarak has decided to leave the post of president of the republic and has tasked the Supreme Council of the Armed Forces to manage the state's affairs," Suleiman said.

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 that the unrest would spread in the Middle East.

The market has since pulled lower as the turmoil did not affect supplies through the Suez Canal, which carries about 2.4 million barrels of oil per day.

SEB Commodity Research analyst Filip Petersson said that Mubarak's resignation created even more uncertainty for oil traders.

"Uncertainty is the first thing that comes into mind," 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?

"Will there be an orderly process towards democracy or will the country be thrown into political chaos? I do not believe that it is the latter -- the military will not let that happen.

"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."

© 2011 AFP

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