LONDON, (AFP) — World oil prices drifted lower on Tuesday, but held above $100 on fears that worsening turmoil in Egypt could disrupt supply flows through the strategic Suez Canal, analysts said.
Brent North Sea crude for delivery in March delivery fell 56 cents to $100.46 a barrel, one day after spiking to $101.73 — which was the highest level since September 29, 2008.
New York’s main contract, light sweet crude for March, slid 62 cents at $91.57 a barrel on Tuesday.
Prices broke through the psychological $100 threshold for the first time since the 2008 economic crisis, as mounting protests in Egypt demanded the removal of President Hosni Mubarak.
Egypt is not a major oil producer, but is home to the vitally important Suez Canal, which carries around 2.4 million barrels of oil a day — roughly equivalent to the daily output of Iraq or Brazil.
“Crude is taking a breather following another spike higher yesterday,” Capital Spreads analyst Simon Denham said on Tuesday.
“Traders are pricing in the possibility of escalation of protests across the Middle East, so for as long as the unrest continues crude prices will remain well supported.”
He added: “Brent finally broke through $100 and sits happily above there for now. Traders need to be aware though that commodities can pull back just as aggressively as they rise.”
Egyptians massed on Tuesday for the biggest day of anger yet in their unrelenting campaign to oust Mubarak, set to be a decisive test of their resolve in an eight-day revolt that has already killed over 100.
Thousands of protesters flooded Cairo’s protest epicentre at Tahrir square from early morning with “march of a million” against Mubarak’s creaking regime to be staged in the Egyptian capital and Alexandria.
Oil also slid on Tuesday as many traders cashed in their profits, said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.
“One of the factors might be profit-taking since we’re at 27-month highs,” she told AFP, adding that the dip might be temporary as the Egyptian political crisis drags on.
Egypt has been engulfed in more than a week of street protests demanding and end to Mubarak’s 30-year rule.
Investors are concerned that similar demonstrations — which have also touched Tunisia, Yemen and Jordan — could spread elsewhere in the oil-rich Middle East.
“After the unrest in Tunisia and Egypt, there is still a high risk of the troubles spreading to neighbouring countries, including major North African oil producers Libya and Algeria,” said Commerzbank analyst Carsten Fritsch.
“Although the turmoil has not affected oil shipments so far, the geopolitical ‘risk premium’ is more likely to increase further.”
Barclays Capital analysts added in a report that “the probability for closure of the Suez Canal is extremely unlikely at the moment”.