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Saudi Arabia goes to war

Published Thursday, March 26th, 2015

Wars and oil do not make for happy bed fellows unless you are long in a falling market, in which case a war in the Middle East is exactly what you want. The problem is that we already have had a series of wars in the Middle East which have been rolling on for a long time in Syria and Iraq. Just yesterday US war planes started to bomb Islamic State forces in Tikrit.

Despite these rolling wars in the world’s most productive oil region, oil prices have fallen by $60 bbl. What are the wars that really matter for oil prices? The question is particularly pertinent today because the Middle East has another war on its hands. In fact it is a war that has been going on for months in the Yemen but which has escalated overnight into something much more substantial.

The news came out yesterday that Saudi Arabia was preparing air strikes to save the Sunni regime of President Hadi against Iranian backed Houthi Shia rebels. Overnight they have gone into action with reports of Saudi Arabia contributing 150,000 troops and 100 aircraft to the operation, supported by Egypt, Jordan, Qatar, Bahrain, Kuwait and Sudan.

The uptick in tensions were behind the continuous rise in oil prices yesterday which another set of large US stockbuilds did little to arrest. A stock market wobble in the US and a weaker dollar provided additional help. Brent closed the day +137 at $56.48 bbl and WTI rose +170 to $49.21 bbl.

to read the rest of the report, please click here

Posted by David Hufton