The U.S. crude oil price hit a 10-week low Friday as the news that Egyptian President Hosni Mubarak stepped down eased the previous concerns of an oil supply disruption in the Middle East.
Light, sweet crude for March delivery dropped 1.15 dollars to 85.58 dollars a barrel on the New York Mercantile Exchange, its lowest settlement since Nov. 30, 2010.
The crude oil price went ups and downs following Egypt’s fears and joys. The commodity had experienced an approximately 6 percent price increase since the crisis began on Jan. 25. Much of that move pertained to the uncertainty surrounding the leadership of Egypt. Although Egypt is not a main oil producer, it controls the Suez Canal, which is an important transportation route for oil from the Middle East. And there were also poignant concerns that the unrest would spread to other nations in the region that were key oil producers and thereby precipitate a disruption in global supplies.
On Jan. 28, as the tension intensified, the Fitch ratings agency lowered Egypt’s credit ratings, which prompted the oil price to soar 4.3 percent.
Those fears were tempered, however, on Feb. 1, thereby causing the commodity to lose ground. Thus the U.S. domestic inventories kept rising, oil prices went on a falling path.
On Monday when Egypt’s banks began to reopen after two weeks of unrest, showing the situation there was calming down, oil fell 1.55 dollars, or 1.74 percent, to 87.48 dollars a barrel.
Tuesday’s trading session was characterized by more selling as the market reacted to the news of China raising its interest rates in an ongoing effort to tackle inflation. But the fact that the dollar dropped against a basket of currencies supported oil to pare losses. The commodity finally settled at 86.94 dollars a barrel, down 0.62 percent.
The oil inventory report Wednesday also proved to be a downside catalyst for oil prices. The U.S. Energy Information Administration (EIA) said, the U.S. commercial oil inventories registered a fourth straight rise, while gasoline inventories hit a 20-year high. The commodity sold off as investors interpreted this into evidence of a slowing economy. Also weighing on prices were signs that Saudi Arabia and other OPEC nations were increasing production.
On Thursday the price of crude responded to the news that Mubarak might resign, and pared gains boosted by the United States’ positive jobless claims report. The commodity gained 2 cents to settle at 86.73 dollars.
And on Friday, besides Mr. Mubarak’s stepping down, the rising dollar index and rally of U.S. stocks triggered oil selling and sent the price to a 10-week low.
“While there may be continuous volatility in the oil prices in the near term, longer term there is reason for optimism,” Conley Turner, Wall Street Stratergies’ senior analyst told Xinhua.
He named the bolstering factors for this outlook including the fact economic activities in the U.S. are picking up, and the fact that China’s moves to cool the economy is by no means an indication that it will scale back its oil consumption, but other emerging markets’ oil demand is growing.
Mr. Turner cited the EIA’s predictions this week as saying that oil prices could average about 93 dollars a barrel in 2011.
