Today WTI suddenly surged 5%, trading at $52.35 at 2:35 pm GMT+7, as fighting in Yemen was very chaotic with the participation of Saudi Arabia. Saudi Arabia has decided to send troops to help the Yemeni government against Shiite rebels (the army supports former President Hadi in Aden).
Yemen locates on a strategic location between the sea-lane transportation of crude oil in the Middle East, with 3.4 million barrels per day pass by. War will lead to traffic being blocked, the regional oil exporters being affected and oil supply disrupted.
Army Shiite Houthis received support from Iran, another OPEC member. It was reported that Iran may pull strings behind the “proxy war” as a pawn against Saudi Arabia. Since the decision to maintain the production of OPEC, Iran has always expressed dissatisfaction and repeatedly called for reducing output, even accusing Saudi Arabia using oil for political purposes aimed at Iran. Iran would be very glad if “turmoil” lasted long enough for the price to recover.
If influence from the Yemen war stayed still and the situation became more confused, market sentiment may push WTI to break the highest of March 5th at $52.35 and rise to around $54.
But Saudi Arabia and Asia said they have yet to worry about the supply may be cut, the output of the Middle East will remain and export routes may still be circulating. Anyway, Middle East remains unstable so far. The fundamentals in the oil market remain unchanged, the oil will decrease.
Today the US will release the number of applicants for unemployment benefits last week, expected to remain the same with the previous week. With positive numbers, dollar will be supported, oil prices will likely hit $52.35 and then retreat.