Crude oil's rally continued last week, and by Friday peaked at $104.90 a barrel. Moreover, due to weekend developments in the Middle East, oil opened this week with rising prices as well. At the moment, crude is trading close to the 106.10 level, marking a 29-month high.

Crude prices continue to rise as fighting between Libyan rebels and troops loyal to Muammar Qaddafi intensifies. Violence in Libya has cut output in the North African country by as much as 1 million barrels a day, according to the International Energy Agency.

In addition, positive U.S. employment data which was released on Friday has also pushed crude oil prices upwards on speculation that demand for crude oil in the U.S. will increase.

Looking ahead to the following week, traders are advised to closely follow the developments in the Middle East. In case the unrest spreads to other oil-producing nations, oil prices could soar further. Traders should also pay attention to the U.S. Crude Oil Inventories report scheduled for Wednesday, as its release usually has an instant impact on the market.