Yemen Local a Chokepoint for Crude Prices

While Yemen contributes less than 0.2 percent of global oil output, its location puts it near the center of world energy trade.

The nation shares a border with Saudi Arabia, the world’s biggest crude exporter, and sits on one side of a shipping chokepoint used by crude tankers heading West from the Persian Gulf. Global oil prices jumped more than 5 percent on Thursday after regional powers began bombing rebel targets in the country that produced less than Denmark in 2013.

Yemen’s government has collapsed in the face of an offensive by rebels known as Houthis, prompting airstrikes led by Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries. The Gulf’s main Sunni Muslim power says the Houthis are tools of its Shiite rival Iran, another OPEC member, and has vowed to do what’s necessary to halt them.

“While thousands of barrels of oil from Yemen will not be noticed, millions from Saudi Arabia will matter,” said John Vautrain, who has more than 30 years’ experience in the energy industry and is the head of Vautrain & Co., a consultant in Singapore. “Saudi Arabia has been concerned about unrest spreading from Yemen.”

Yemen produced about 133,000 barrels a day of oil in 2013, making it the 39th biggest producer, according to the U.S. Energy Information Administration. Output peaked at more than 440,000 barrels a day in 2001, the Energy Department’s statistical arm said on its website.

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell