It has been a crazy past few weeks for the global markets, with investors worried about the rapid spread of civil unrest in pockets of the Middle East and North Africa.

Following successful public-led revolts in Tunisia and Egypt, the markets are focused on the violence and looming government change in Libya. That country holds the largest oil reserves in Africa and produces high-quality oil. At 1.2 million barrels of oil per day, the country is the 15th largest exporter of oil in the world, as per the Energy Information Administration (EIA). Fears over the crisis spreading to other key oil producing nations with authoritarian governments such as Saudi Arabia drove the Brent crude oil futures to $120 per barrel during the week, up from less than $100 only a few days earlier.

Assurances by oil producers to boost supplies may ease the pressure on oil prices in the near future. However, following the recent turbulent political developments, I expect major global economies to wake up to the realization that they need to diversify their oil supply sources away from countries that have poor governance standards (Europe accounts for about 85% of Libya’s oil exports). The prevailing uncertainty has boosted the stocks of oil exploration companies in countries with liberal government policies and substantial domestic oil exploration operations such as Brazil-based Petroleo Brasileiro SA (NYSE:PBR) and Colombia-based Ecopetrol SA (NYSE:EC).

I believe that supply shocks are inevitable in the future too, especially given that oil assets are largely concentrated in politically unstable regions of the globe. However, given its relative geographic insulation from these problems and recent massive discoveries of reserves, Latin America should be able to help quench the world’s increasing thirst for oil.

Home-grown entrepreneur and one of the world’s richest persons, Carlos Slim has jumped onto the Latin America oil bandwagon. The Mexican businessman’s Grupo Carso SAB acquired a 70% stake in Colombia-based Tabasco Oil recently.

Further south, Brazil’s rising oil exports (which jumped 17% to $1.19 billion in January 2011, compared to the year ago period) and substantial “pre-salt” reserves also make it an attractive long-term destination for investments in the future. There, Chinese refiner, China Petrochemical Corp (NYSE:SNP) and Repsol YPF SA (NYSE:REP), Spain's largest oil company, are working together in a $7.1 billion deal through a Repsol unit.

Expect more news about the Chinese investing in Latin Americas oil. China is the second largest importer of oil in the world, after the United States.

Anyway, that's my take on it.

Happy trading next week!

Rudy

Best performing stocks of the week include:

• Compania de Minas Buenaventura S.A. (NYSE:BVN) +5.8%
• Petroleo Brasileiro S.A. (NYSE:PBR) +5.5
• Petrobras Energia Participaciones S.A. (NYSE:PZE) +5.5%
• Vivo Participacoes S.A. (NYSE:VIV) +5.4%
• Ecopetrol SA (NYSE:EC) +3.2%