Global hot spots are quickly forgotten by oil traders

Melbourne

BACK when oil traded at US$115 a barrel in June, traders were talking about the fighting in places like Iraq, Ukraine and Libya as part of the reason it was so high.

Fast forward seven months and while crude has faded to US$50 a barrel amid a supply glut, those geopolitical risks - along with some new ones that emerged - remain largely intact. Islamic State militants haven't given up the goal of a Middle East caliphate, Libya is mired in chaos, pro-Russian separatists keep skirmishing with Ukrainian forces and North Korea is fighting Hollywood.

All of this has some analysts wondering if investors are setting themselves up for a nasty surprise by driving oil down so far.

To Michael McCarthy, chief strategist at CMC Markets, current prices indicate investors see "almost zero risk" of a geopolitical event disrupting output. In other words, brace for a big jump if something does flare up in a key pr…