Oil wobble amid growing expectation of Mubarak exit

10th February 2011, Comments 0 comments

World oil prices wobbled on Thursday amid heightened expectations that Egyptian President Hosni Mubarak was about to step down, after a two-week uprising that sent crude to two-year peaks.

Brent North Sea crude for delivery in March slipped 88 cents to $100.94 a barrel in late afternoon London trade.

Meanwhile New York's main futures contract, light sweet crude for March, rose 29 cents to $87.00 a barrel.

Mubarak appeared to be on the brink of stepping down on Thursday as thousands of anti-regime protesters massed excitedly in Cairo's central Tahrir Square amid rumours he would go.

State television said Mubarak would address the nation later in the day and the military announced it would respond to the "legitimate" demands of the people in a statement seen as indicating it was ready to fill the vacuum.

State television said Mubarak was holding talks with Vice President Omar Suleiman.

As the rumour mill swirled in Egypt, CIA director Leon Panetta said Mubarak would likely hand over power to Suleiman.

SEB Commodity Research analyst Filip Petersson told AFP that Mubarak's exit would spark fresh uncertainty in the oil market.

"It is quite difficult to say if it is a bullish or bearish factor (for oil prices) if he steps down. It creates a lot of uncertainty," Petersson said.

"Will Suleiman just take over? Then, there is not that much change and protests are likely to continue and possibly escalate -- i.e. bullish for crude.

"On the other hand, people could accept it as a first step and hope that he will step up the reform process, which would be bearish."

Petersson added: "In the longer run, if the opposition is given more room to manoeuvre there may soon be another kind of political crisis, which also would be bullish.

"The initial reaction in the crude oil market has been volatility and a slightly falling trend -- hopeful uncertainty."

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 radiate in the region.

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

Elsewhere on Thursday, the OPEC cartel raised its 2011 global oil demand growth estimate in view of cold winter weather and a "sturdy" economic outlook, particularly for the United States and China.

The Organization of Petroleum Exporting Countries said it was pencilling in world demand growth of 1.4 million barrels per day (bpd), or 1.62 percent, to 87.74 million bpd for this year, compared with 1.23 percent previously.

"Bitter winter has been hammering most of the OECD (Organisation for Economic Co-operation and Development) region since last November leading to a noticeable increase in energy usage," OPEC said in its latest monthly bulletin.

"Winter petroleum product consumption increased, leading to an adjustment in the total world oil demand forecast not only in 2010, but in 2011 as well."

Furthermore, "sturdier industrial activity within the US and China, ignited by stimulus plans and government incentives, boosted demand," it said.

Earlier, the International Energy Agency -- the energy policy and monitoring arm of the 34-member OECD -- predicted that oil demand was expected to grow in 2011 despite the pace of the global economic recovery tapering off.

After taking into account the latest economic forecasts from the International Monetary Fund, the IEA said global oil product demand should reach 89.3 million barrels per day (mbd), an increase of 1.5 mbd.

The vast differential between Brent and New York crude, meanwhile, remains at a record level owing to high crude oil reserves in the United States.

Oil was partly weighed down this week by the US government's latest weekly report on energy stockpiles, which showed increases that raised questions about weakening demand in the world's biggest oil-consuming nation.


© 2011 AFP

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