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How Libya Affects Your Oil Trading

Trading Oil in the Binary MarketsRecently, it was revealed that Libya–the Middle Eastern nation–has recently lost the equivalent of $7 billion in oil revenues because of strikes. This has happened because workers have demanded more political power or a respectably higher amount of pay. So far, Libya’s government has not consented to grant either of these things. And the pressure is growing. There has been a big increase in competition from Nigeria and Algeria, and this has greatly exacerbated Libya’s dilemma. Oil production is currently over a million barrels per day lower than before the strike.

This has obviously been a bad thing for Libya’s economy, but what does this mean for the world’s oil market? This is a loaded question, and the answer will largely be determined by where your interests lie. Libya’s government is hoping to restore production soon and is currently on the lookout for new markets in order to help restore this sector of the market back to where it was. The original outlook was for this to happen sometime next week, but there is no definite plan in place as of yet for this to happen. As of right now, it doesn’t look like this will be happening.

The problem lies much deeper than a temporary slowdown in how much oil is being sold to outside markets. The strike has also led to damaged pipelines and facilities, along with weakened motivation by oil workers. Libya’s economy relies heavily upon its oil production, and it seems that the damage has been done on many fronts already.

For investors across the board, this can have a serious impact. Over the last week, the price of crude oil futures has gone up thanks to the fact that other nations have been able to step up and fill in the gap in the market created by the Libyan strikes. The price per barrel has gone up roughly $5 over a five day period, so it’s pretty apparent that Libya’s absence as a player in the oil market has been felt. How long this basic supply and demand phenomenon will last remains to be seen, but it’s pretty clear that Libya will probably be out of the picture for a short while still. Prices might stabilize for now, or even go up slightly, but you should expect them to drop once again when Libya’s production and export capabilities are restored to full strength. For the short term oil investor, especially those that trade with binary options or day trade futures contracts, this is an important thing to remember.

It does provide an interesting situation for currency and international stock traders, too. The Libyan currency–the dinar (LYD)–has acted quite strangely recently compared to the U.S. dollar (USD) and has actually gone up in value. This is the most traded pair involving the LYD, but Libya does do more business within the Mediterranean region, so looking at the Euro will give a better picture of the strength of this currency. There have been some significant drops in price with the LYD/EUR pair over the last month, and this is probably going to continue for the foreseeable future. When trading binary options you most likely not find a Libya cross pair, but you can use it as a basis for oil trading and other assets.

The Libyan Stock Exchange will easily see some impact because of this, too. The exchange is comprised pretty much of banks and insurers and not oil related companies, but as the economy struggles, so too will these major financial institutions. This is definitely not a major market for international traders, but if you are interested in this area of the world, it is something you will want to consider before you enter a position. This is especially true because of the fact that the market has been closed periodically because of political instability.
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