Oil prices surge as Saudi strikes in Yemen Mar 26, 2015 5:05:31 GMT -6
Post by jeffolie on Mar 26, 2015 5:05:31 GMT -6
Oil prices surge as Saudi strikes in Yemen trigger supply worries
By Carla Mozee and Eric Yep
Mar 26, 2015
Middle East turmoil is back in play for oil.
Oil prices jumped as much as 6% Thursday, with reports of Saudi Arabian airstrikes in Yemen raising fresh concerns of supply disruptions.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in May CLK5, +3.70% climbed $1.93, or 3.9%, to $51.12 a barrel, in the Globex electronic session. It hit an intraday high of $52.48 a barrel, according to FactSet data.
May Brent crude LCOK5, +3.54% on London’s ICE Futures exchange rose $2.30, or 4%, to $58.75 a barrel.
Saudi Arabia and other Gulf nations launched airstrikes against rebel forces in Yemen’s capital and across the country. The strikes began Thursday morning, hours after Yemen’s president, Abed Rabbo Mansour Hadi, fled the southern port city of Aden by boat when Iranian-backed Houthi militants closed in.
Yemen, although not a very big producer of crude oil, is adjacent to the Bab el-Mandeb Strait, one of the world’s main transit points for seaborne trade. Oil tankers that transit the Suez Canal also need to pass through Bab el-Mandeb.
The Bab el-Mandeb Strait is 18 miles wide at its narrowest point, and its closure could prevent oil tankers from the Persian Gulf from reaching the Suez Canal and block the quickest route for tankers from North Africa to Asia, according to the U.S. Energy Information Administration.
Yemen president flees Aden as Houthi rebels advance
Yemen’s President Abed Rabbo Mansour Hadi fled his palace in Aden on Wednesday, as Houthi militants moved in on the southern city.
Oil purchasers such as Asian refiners are keen to hedge their supply risk in the event of a disruption, said analyst Daniel Ang at Singapore-based Phillip Futures.
Oil prices have been rising for about a week, helped by a weaker dollar DXY, -0.45% after dropping sharply in the first half of this month. A price increase of more than 2% in a single session attracts investors looking to boost positions, Ang said.
Both Nymex WTI and Brent crude prices extended overnight gains, shrugging off a larger-than-expected increase in U.S. oil inventories.The Energy Information Administration on Wednesday said crude supplies rose for an 11th straight week — up 8.2 million barrels for the week ended March 20.
Thursday’s price increase has brought geopolitical risks in the Middle East back into focus, after months of conjecture about U.S. shale oil production and supplies.
“The price rise is likely to be short-lived, but I’m sure traders will use it to take some profit as the world briefly remembers that the Middle East is volatile,” Richard Gorry, managing director of JBC Energy Asia, said on the sidelines of the Platts Oil Refining conference in Singapore.
He said he doesn’t expect the Saudi airstrikes to have a real impact on the availability of crude.