US crude settled at a two-month low as Egyptian President Hosni Mubarak’s resignation calmed fears that growing unrest in the country would disrupt key oil-supply routes.
Light, sweet crude for March delivery settled $1.15, or 1.3%, lower at $85.58 per barrel on the New York Mercantile Exchange, the lowest closing price since November.
London Brent crude on the ICE futures exchange settled 56 cents higher at $101.43 per barrel.
Mubarak ceded to protesters’ demands and resigned from office, ending his 30-year reign over Egypt. Vice President Omar Suleiman, in a statement on state television, said Mubarak delegated control of the country’s affairs to Egypt’s army.
The resignation allayed fears that growing unrest could interrupt the flow of oil through the Suez Canal and Sumed Pipeline, which combined transport 3 million barrels per day of oil and fuel products.
“If it got violent, it could have increased the potential for interruptions to supply. The chances of that have subsided, at least for today,” said Dominick Chirichella, an oil analyst with the Energy Management Institute.
Brent futures are up 4.5% since protests began in late January, indicating that market participants still believe the unrest could affect oil supplies in the region. Tunisia, Yemen and Jordan have already been forced by unrest to undertake government reforms, but none of those states are major oil exporters.
Nymex-traded futures rose above $92 per barrel last month, but have given back all of those gains, due in part to record supply levels in Cushing, Oklahoma, the delivery point for Nymex contracts. Nymex futures traded at more than a $16 discount to Brent today.
“We are not out of the woods yet,” said Rich Ilczyszyn, a broker with Lind-Waldock in Chicago. “The contagion thing is something that after this knee-jerk reaction could be a possibility.”
“I wouldn’t short oil at all,” he said, speaking of placing a bet that prices will fall.