Suez Canal

Crude Oil has now been trading over $100 a barrel for over a week. The price of crude began to rise rapidly when tensions in Egypt began to spark over democratically elected President Morsi. Any tensions in Egypt can have a strong impact on Crude Oil prices because lots of Crude Oil is shipped through the Suez Canal. Eventually, geopolitical tensions in Egypt will ease and Crude Oil prices should begin to come down. A great low risk way of playing a potential fall in Crude Oil is the Crude Oil Calendar spreads.

2013-07-24-TOS_CHARTS

The breakout in the crude oil calendar spread happened a day or so after Egypt erupted in civil protests against Morsi. This breakout leads me to believe the rise in crude oil is geopolitical. It will be interesting to continue to monitor the crude oil calendar spreads to see just how long this contango will last.

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