It's a President's prerogative to change his mind. Egypt is in turmoil and so is the Brent West Texas Intermediate oil spread after President Mubarak gave a speech that basically said, “Heck no, I won't go.” This came after U.S. intelligence and media widely reported that Mr. Mubarak was ready to relent to the will of the people and step down. It was being reported that Mr. Mubarak had already taped his exit speech on film, yet now it seems perhaps he taped a few with different ending's before he gave his live rambling speech.
Protesters and the markets were simultaneously confused and later disturbed as Mubarak changed his mind or perhaps cut some back room deal. Instead of stepping down, the President played a shell game and supposedly anointed his vice president with his presidential powers. Kind of the opposite of what President Vladimir Putin did I guess. The protesters were not pleased as Vice President Omar Suleiman isn't exactly the change they had in mind.
Mr. Suleiman was in charge of Egypt's security force and has been accused of torturing Egyptian citizens. In his speech he warned of a coup and showed all the warmth and charisma that you would expect from a regime security enforcer. He warned that if the protests don't end he could impose martial law and other heart warm gestures.
Reuters News was the only one reporting that President Hosni Mubarak would not step down before his speech quoting Egypt's Information Minister Anas el-Fekky as saying, "The president is still in power and he is not stepping down. The president is not stepping down and everything you heard in the media is a rumor."
Well rumors move markets, especially in oil. In fact the Brent WTI spread, according to my figures, blew out to an all time high. Similar to the move of Brent made on the greatly exaggerated reports of Saudi King Abdullah's demise. Those rumors were later denied and proved to be untrue, yet it didn't stop the market from worrying about the inconvenient timing of what might have created an uncomfortable void and uncertainty in the world's largest oil producer.
The WTI anchored by record supplies in Cushing, Oklahoma, has been the hedge against getting long Brent crude on general North African and Middle Eastern risk. Risk on and risk off. If risk increases the market buys the Brent and sell's the WTI. Risk off, sell the Brent crude and buy the WTI. If Egypt looks like it's going to erupt watch the Brent crude lead the way. WTI will follow but as the spreading of risk continues, it will be the weaker sister in that scenario.
The other factor in play is currency risk. More economic woes for Portugal have the dollar index looking a bit dynamic. Risk aversion is going into the dollar and may influence the widening the Brent/ WTI spread. Other commodities like cotton and sugar seemed unmoved by the dollar rally, but if the dollar continues to go higher, it could lead to weekend profit taking.
The world and the markets will be watching Egypt once again and what happens next may have a profound difference on the history of the world.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at firstname.lastname@example.org.