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Jan 31, 2011, 11.04 PM IST
Political unrest in Egypt entered its seventh day. People gathered across the capital city, Cairo, to demand the end of President Mubarak's rule. Many countries including India, US, China had begun evacuating citizens as the death toll crossed 100.
Kate Dourian, Middle East Editor of Platts, in an interview with CNBC-TV18ís Shereen Bhan, spoke about the seventh day of protest in Egypt.
Below is the verbatim transcript of the interview. Also watch the accompanying video.
Q: The protest has entered the seventh day. There have been no disruptions at the Suez Canal so far, but what is your assessment of the kind of volatility that is likely to continue as far as oil markets are concerned?
A: Oil markets are moving not only because of threat of distortion to the Suez Canal, but there is a general strike being called tomorrow. We are not sure on how thatís going to have an impact. It is largely the fear of contagion.
Egypt is known as the mother of the world and is the most popular scarab country with 80 million people. It has cultural influence in the region. There is a saying that, if Egypt goes, all the other Arab countries will tumble. The fear is that one might get a regime change in Egypt.
It may not be particularly pro-western because at the end of the day, Mubarak has been an ally to United States, has been involved in the war against terrorism and there is an existing peace treaty with Israel. All these points cause a potential change in the balance of power in the region. Everybody is waiting to see where the penny is going to drop next. Thatís really whatís been reflected in the oil market.
Q: From where are you seeing things at this point in time? How real are the fears of a possible contagion?
A: At the moment, people are waiting and watching to what happens in Egypt. Each country has its separate issues, but there is a very young population and in lot of these countries there is joblessness. Obviously, the Gulf States are bit immune to that as they have oil wells and they have been spending a lot of money due to high prices of early 2008.
We have a very youthful population with not enough jobs and rising crude prices in other countries. In North Africa we have Yemen which has professionalism and anti government protests. Sudan is on the verge of seeing separatist. So, you are seeing a very new Middle East that will immerge and nobody knows which direction it is going to go.
Q: OPEC at this point in time is putting on a brave face and saying that it will hike production if needed. At this point in time, there has been no disruption. In the short term, where are you seeing oil prices headed?
A: Oil prices tried to go up to USD 100 today and went up to USD 99.97, but it was thin volume in early Asia trade. The oil prices are going to weaken very much, until the picture in Egypt becomes a bit clearer. You will see the geopolitical tension in the oil market linger for a while. Supply is not yet a threat. The only threat to supply would come, if the Suez Canal was closed for any reason.
For example, you would have to make a much longer journey around the Cape that would add to your shipping costs and would make it a lot long route for west bound traffic. Itís the fear that there might be more turmoil in the Middle East which is always been seen as a bit volatile anyway and accounts for 60% of the worlds oil reserves. Thatís driving this bullish sentiment in the market.
Q: At this point in time, countries like America are staying away and not wanting to get involved or seen getting involved in the domestic issue. With West is not intervening at this point in time, how do you see this panning out?
A: They took a while to respond as Mubarak was a strong ally and is the biggest recipient of military aid after Israel. They have to measure their work very carefully. But, at the same time, you cannot say that you want democracy and ignore the fact when people are speaking. They would not like to see regime change, but a political reform and it hasnít been enough so far.
Tags: Political unrest, Egypt, President Mubarak, China, US, India, Platts, Kate Dourian, Suez Canal, Oil markets
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