Egyptian tensions push oil prices higher -- but is is the climb sustainable?

The price of oil is on the rise due to mounting tensions in Egypt.

The price of Brent crude in London reached above $103 a barrel, while oil on the NYMEX climbed closer to $93 a barrel -- with the $100 mark not far away.

Tens of thousands of people have taken to the streets across Egypt to protest the 30-year rule of President Mubarak, calling for him to step down and an immediate democratic election.

Although Egypt is not a major producer of oil in comparison to some of the others, its geographical proximity to the Middle East and Israel have energy traders concerned.

In a conversation with Phil Flynn, an executive at PFG Best and leading oil analyst and energy trader, he revealed that the concern is that the unrest may spread across to neighboring countries, risking supply from other operations.

Nonetheless, most analysts agree that the current price of oil is not sustainable based on the current supply and demand fundamentals. Over the last few months, the price of oil has been climbing on an increased global demand and the belief that the economy is on the mend. Because the recent spike is based solely on the Egyptian concerns, the price is likely to descend when peace is once again established.

In addition to sparking a rise in oil prices, the situation in Egypt has caused other notable petroleum news, including:

• International operators and producers have moved quickly to evacuate any foreign employees working in Egypt, as well as their families, to ensure their safety should protests ignite into a more violent situation.
• RWE Dea has declared a force majeure on the jackup it contracted from Atwood Oceanics for drilling in the Mediterranean Sea offshore Egypt.
• The Egyptian military has been deployed to protect the Suez-Mediterranean (SuMed) oil pipeline that spans the Suez Canal from any possible attack.

While the world looks on, Egyptian protesters practice their voices in the first efforts at free speech many have ever had.

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Phaedra Friend Troy is the content director for PennEnergy.com, an all-energy website that provides oil and gas, power and infrastructure news, analysis, reports and more. Sign up for a free daily enewsletter today.