Yemeni Danger Spikes Oil
Brad Hoppmann | March 26, 2015 at 4:14 pm
Crude oil jumped this morning on the news Saudi planes were bombing rebel forces in neighboring Yemen.
Is the world’s energy lifeline at risk?
Though answer is “yes,“ the real threat isn’t in Yemen at all. Saudi Arabia faces threats on all sides.
This begs the question: Is the kingdom in danger?
That would be a dangerous explosion.
warning sign
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Why does the energy market care about Yemen? After all, it doesn’t produce much oil and it isn’t near the critical Strait of Hormuz where ships must pass to bring Gulf oil to the rest of the world.
However, Yemen does sit on the 18-mile-wide Bab el-Mandeb Strait. Its location is essential because tankers go that way to reach Europe.
What’s more, several different navies guard those waters and the local pirates in small boats are not much of a threat even if Yemen began giving them shelter.
Last week, everyone was worried about an oil glut. Has anything really changed?
In one sense, no. Crude is still far below its peak even after today’s gains. I suspect most of this move is “short covering“ by traders who were holding bearish energy bets. They want to avoid even the small risk of a much greater price spike.
That risk is still small — but it’s more than zero.
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Look at this map of the region.
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