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Oil prices dip but Egypt woes provide support

business Updated: Jul 04, 2013 09:17 IST

Oil prices eased slightly on profit-taking in Asia on Thursday but remain supported by concerns about turmoil in Egypt after the army overthrew and detained president Mohamed Morsi.

Investors are closely watching whether the latest unrest in Egypt will escalate and affect stability in the oil-rich and politically volatile Middle East region.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for delivery in August, was down eight cents at $101.16 a barrel in morning trade after ending Wednesday at its highest level since May last year.

Brent North Sea crude for August slipped 37 cents to $105.39.

"The gains from previous days have scaled down as the crude market seems to have priced in the transfer of power from the civil to transitional government in Egypt," David Lennox, resource analyst at Fat Prophets in Sydney, told AFP.

"What the market will be closely watching out for now is the reaction from those previously in government, and whether that would escalate the situation."

The Egyptian army on Wednesday toppled Islamist president Morsi after a week of bloodshed that killed nearly 50 people as millions took to the streets to demand an end to his turbulent year of rule.

In a televised address, army chief Abdel Fattah al-Sisi -- who was the defence minister in Morsi's government -- said the country's Islamist-drafted constitution had been suspended, while top judicial official Adly Mansour was interim president.

Sisi also announced early presidential elections, but did not specify when they would be held.

While not a major crude exporter, Egypt is home to key oil chokepoints such as the Suez Canal and the Sumed Pipeline.

Lennox said prices were not likely to rise significantly from current levels unless the political unrest spreads to other countries in the region.

"The real risk as far as the market is concerned right now is if we see militaries intervening in other Middle Eastern countries as well," Lennox said.