As the political instability worsens in Egypt, the focus turns towards the Suez canal, which ships 4.5 million barrels per day. Should the turmoil get any worse, the vital canal could be shut down which would lead to a hike in oil price. But according to Saxo Bank’s Ole Hansen, Egypt isn’t the biggest threat to the oil supply, Libya is.

Libya is experiencing a strike which has seen the country’s ports being shut down for three weeks, and this has resulted in a significant drop in exports. But these events have not yet triggered a rally like we have seen on previous occasions. Supply disruption during the Libyan war in 2011 triggered price spikes above $125 per barrel.Oil is currently trading around $110.50 per barrel, the highest oil price in four months. 

Ole thinks that demand from refineries will reach a seasonal peak within the next few weeks, after which time elevated prices will be difficult to sustain unless the geo-political situation continues to worsen.

Read more about Ole Hansen’s predictions here:

http://www.tradingfloor.com/posts/strong-week-commodities-gains-seen-sectors-1562104540