What: Oil producers including Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) were over 1% higher on Friday as details emerge about the quickly escalating troubles in Iraq. According to global news reports, insurgents have not only captured the second-largest city in Iraq, but are also on their way towards Bagdad. In response to the crisis, President Obama is believed to be considering airstrikes against the militia at the request of the Iraqi Government.
So what: Iraq was expected to supply around 45% of the increase in demand for oil in the next decade and is currently the second-largest oil producer in the OPEC group. The fighting has already sent the Brent crude oil price up 3% to US$113 per barrel according to the BBC and it could go a lot higher if the Iraqi oil tap is turned off.
Now what: Global stockmarkets are on edge with the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) finishing Friday's session down 0.44%. For investors looking to hedge their portfolio or profit from the volatility, both gold and oil stocks look appealing. Two smaller, highly leveraged oil producers which could be worth considering are Drillsearch Energy Limited (ASX: DLS) and Beach Energy Limited (ASX: BPT). These two stocks were up nearly 7% and 3% respectively on Friday.
