Oil Pares Gains on Reports Mubarak Stepping Down

U.S. oil was up slightly on Thursday afternoon after a volatile day which saw it spike $1 on strong U.S. jobs data and talk the Saudi King had died, only to fade after reports Egypt's leader Hosni Mubarak would step down.

In London, Brent crude was down in choppy trade as the dollar climbed and OPEC reported a boost in January output.

"A bit of the premium has come out of the oil markets. . .Obviously, if it's a peaceful stepdown (by Mubarak) and anarchy stops on the streets, it will completely ease fears that of any remote possibility that the Suez Canal was ever going to be disrupted," said Rob Montefusco, at Sucden Financial.

March ICE Brent LCOc1 was down by $0.68 at $101.13 a barrel at 1600 GMT having earlier risen by over $1 to $102.88 a barrel on reports that the Saudi king might have died. Saudi sources denied the reports.

U.S. crude for March CLc1 was up $0.21 at $86.92 a barrel after having risen earlier by $1 to as high as $87.77 a barrel as U.S. jobless claims were reported at a 2-1/2-year low.

"There's a little bit of rumbling on Europe and the euro is weakening and the dollar is strengthening. . .I'd say the stronger dollar is the main factor," said Simon Wardell, an oil analyst at Global Insight.

"The rumor about the Saudi King sent Brent higher and the Brent/WTI spread blew out and after the denials Brent pulled back. The concern was about a transition of power in Saudi Arabia with all this uncertainty about Egypt and the region going on," said Phil Flynn, analyst at PFGBest Research in Chicago.

Media reported that Egypt's President of 30 years may step down and the situation in the country would be clarified soon, while the head of the U.S. CIA said there was a "strong likelihood" Mubarak would go on Thursday.