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Ukraine, Iraq, Syria, Libya and Oil Futures
Is now the time to make money with oil futures options? Russian President Putin met with Ukrainian President Poroshenko in Minsk, Belorussia. The concerns are the civil war in Ukraine, Russia’s concerns about NATO troops stationed on its doorstep and the prospect of a long cold winter for Europe if transit of natural gas and oil through Ukraine is totally cut off. Syria and Iraq have become home to a new brand of Islamic terrorist that robs billions from banks and takes over oil fields to finance operations. And another oil and gas producer, Libya is falling back into the throes of civil war. Common factors here beside total chaos, are the prices of natural gas and oil. Surprisingly gas and oil futures options have not risen all that much despite the continue bad news in these regions. Options trading mistakes to avoid include assuming that every hot spot in the world will bring global disaster and assuming that all local conflicts will remain local.
Ukraine and Oil Futures Options
Russia is the biggest producer of oil in the world at more ten million barrels a day. It is the major source of natural gas and crude oil for Europe. The vast majority of this oil as natural gas flows via pipeline through Ukraine. If the civil war gets worse in Ukraine the price of oil could go up substantially. Buying oil futures options could be a reasonable way to reap substantial profits if things go from bad to worse on the Russia/Ukraine border.
Iraq, Syria and Oil Futures Options
Iraq is the number seven oil producer in the world at 3.4 million barrels a day. Iraq also has vast untapped reserves that are not getting attended to because of the war raging across Syria and Iraq. Syria ranks 32 with 400,000 barrels a day and the same issues apply there as Islam militants have taken over vast regions of both countries. In this case the militants are selling the oil that they control to finance their war efforts. The fact of the matter is that this area will likely be in conflict for some time causing a slight increase in oil and natural gas prices. It would take a major escalation and broadening of this conflict to drive prices much higher. Buying oil futures options simply with this region in mind is probably not a profitable idea unless the Saudi and Iranian fields are threatened and their 14 million barrel a day combined output.
Libya and Oil Futures Options
Libya was one of the first countries to throw out a dictator in the Arab Spring. Unfortunately the situation has turned to chaos as various groups fight for power and regional powers such as Egypt are tempted to intervene to stop the spread of Islamic terror. At 700,000 barrels a day production a drop in Libyan production is not likely to drive oil futures higher. But as a barometer of events in the region it is worrisome.