Time for an Oil Supply Cutoff Hedge?

August 7th, 2014
in contributors

Written by , Morss Global Finance

With civil/tribal/religious/ethnic/terrorist wars raging in many of the leading oil exporters, is it not just a matter of time before global oil exports are curtailed? The countries with asterisks in table below are the ones to be watched carefully.

Follow up:

Source: US Energy Information Administration

Nigeria has been in the news recently because of abducted children. But the international search for them highlighted just how risky things are there. No children recovered with the terrorist group Boko Harem seemingly doing whatever they want.

Iraq? Well who knows what will happen next, and Iraq is the 4th leading oil exporter.

Russia, Iran, and Kazakistan have asterisks not because local disruptions are likely but because how they might use oil as a political bargaining tool.

Venezuela has been unstable ever since Hugo Chavez passed away and the economy is in tatters.

And then we have Libya: yes, the new parliament just met, but a civil war is raging with countries pulling their embassy staffs.

My Conclusion
It takes just one of these situations to escalate resulting less oil on the world market and resulting price spike.

In these circumstances, it would seem prudent to include some "oil" in your portfolio. If you track oil companies, choose one. For those that do not, consider adding an ETF such as United States Oil Fund, LP (USO) or PowerShares DB Oil Fund (DBO).

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