NEW YORK: Oil prices surged on Thursday (Mar 26) after Saudi Arabian jets struck rebel targets in Yemen, sparking fears that an escalating crisis in the country could threaten crude producers in the Middle East.
US benchmark West Texas Intermediate for May delivery soared US$2.22, or 4.5 per cent, to close at US$51.43 a barrel on the New York Mercantile Exchange, its highest level in more than three weeks. In London, Brent North Sea crude for delivery in May, the global benchmark, jumped US$2.71 to US$59.19 a barrel.
The contracts had begun rallying on Wednesday following news that Yemen’s President Abedrabbo Mansour Hadi was rushed to a “secure location” after a warplane attacked his presidential complex.
Yemen borders major oil producer Saudi Arabia, which on Wednesday launched strikes against Huthi rebels in a bid to help save Yemen’s embattled leader.
Yemen has been gripped by growing turmoil since the Shiite rebels launched a power grab in Sanaa in February.
“The geopolitical tensions in Yemen are pushing prices higher,” Daniel Ang, an investment analyst with Phillip Futures, told AFP.
“Yemen is not a big producer but it is a trade hub in the region so tensions over there could cause a disruption in the trading activities for energy products,” said the Singapore-based analyst.
The turmoil has overshadowed the effect of rising US crude supplies, which increased by 8.2 million barrels in the week ending Mar 20, adding to a global supply glut, analysts said.
World oil prices had collapsed by about 60 per cent in the six months to the start of February, with strong US production exacerbating elevated output by the OPEC cartel.
“The higher the oversupply on the oil market became in recent months, the more the geopolitical risks were ignored,” Commerzbank analysts said in a note to clients.
“These have suddenly come back into sharp focus, however, following the Saudi-led military air strikes carried out by 10 Gulf states against the Huthi rebels in Yemen.”