Vang SJC

Conflict in Yemen is one of the factors that impact on the oil market by the special geographical position of the country. According to the U.S. Energy Information Administration (EIA), Yemen’s oil production is around 133,000 barrels per day in 2013, however this country lies on the sea key transportation

Bab el-Mandeb of Aden region bordering approximately 3.8 million barrels of oil are shipped daily from the Persian Gulf to the West.

Currently in Yemen, there are 4 conflicting forces: the army of Yemeni President Abd Hadi Mansur Rabbuh, Houthis rebels supporting former President Ali Abdullah Saleh, Al-Qaeda in the Arabian Peninsula.

Conflict in Yemen can be seen as a civil war between Sunni government and Shiite rebels. Recently Arab responded to calls for military support from Yemeni President, by bringing the military alliance of 10 countries to bombard the region occupied by the rebels.

Shiite Houthis rebels who appears to receive support from Iran, had taken Sana’a capital last year and is expanding to Southern area.

On 31st March, allied forces led by the Arab has blocked Yemen’s sea ports and is ready to intensify air strike aiming at Shiite rebels as the rebels move to Aden. Yesterday, the rebels has taken Bab el-Mandeb, the important trading line of the region. Arabia is also still struggling to strike to prevent Houthis military.

Yemen is becoming proxy war between the Sunni backed by Arab and Shiite supported by Iran. Arab and Iran has conflicts over relations with the U.S. and Western countries, as well as their position in the Middle East. Two members of the largest oil exporters, who are now combating over OPEC policy of maintaining output.

The recent US efforts to reach an agreement with Iran has made Arabia uneasy, because it always consider itself as U.S. close ally.

If Iran gained control of Aden sea port area, the country would not need hopelessly calls OPEC countries to cut production. Iran will only need to close the road, forcing Arabs to find other shipping routes with higher costs. Oil supply from the Middle East will be reduced by the burden caused by transport costs, helping oil price rise. As a result, in the long term oil price will bounce back.

Arab is also struggling to strengthen its influence in the Middle East. If the country wins in Yemen, it will have the right to control shipping routes and bending the price at its own desire. It may put downward pressure on the oil price to protect its market shares from U.S. shale oil producers.

Today at 7:00 pm GMT+ 7, a plant in Hodaida was bombarded, 25 civilians were killed. This is the greatest number of casualties occurred since tension began. Oil prices soared immediately from $47.38 to $48.04. Movements in short-term market will follow the war in Yemen and the news from the U.S.

Fiinvesting.com

Hanh Nguyen