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Egyptian unrest forces crude higher

Ongoing political instability in Egypt is causing jitters in the oil markets.

All trading involves risk. Losses can exceed deposits.

For the first time in ten months, the US light crude price has broken above the $100 level. The main driving force behind this is the increased political tension in Egypt and the very real possibility of the government being toppled.

Egypt has been far from a peaceful place since the end of the Mubarak reign, but the recent escalation in public dissatisfaction has seen oil markets react. Any change in the power base of Egypt could well affect, or even halt, the flow of shipping through the Suez Canal. In reality, this would just be an inconvenience in the long-term and an additional cost; however, in the short-term it would badly affect the supply of oil.

Also part of the issue are current fears over European sovereign debt – the knock-on effect of which would be a flight to safety out of euros, and probably into US dollars. US light crude – like almost all commodities – is being priced in US dollars.

Now that the ceiling of $100 has been broken, the next level traders have in their sights will be the May 2012 spike up to the $106.40 area.

Daily US Light Crude chart

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