West Texas Intermediate crude soared for a fifth day and Brent touched a near three-week high after Saudi Arabia and its Gulf Arab allies initiated a strike against Iran-supported Houthi rebels in Yemen, rekindling fears of a widespread conflict in the worlds largest oil-production region.
US crude for delivery in May traded 4.80% higher at $51.57 per barrel at 8:42 GMT, having earlier risen to a 3-week high of $52.48. The contract surged 3.58% on Wednesday to $49.21, a fourth straight daily gain.
Meanwhile on the ICE, Brent for settlement in the same month was up 3.84% at $58.65 a barrel after it earlier touched $59.78, the highest since March 9th. The European benchmark crude rose 2.49% yesterday to $56.48, settling at a premium of $7.27 to its US counterpart from $7.60 on Tuesday. The gap was at $7.08 on Thursday.
Saudi King Salman order air strikes against Shiite Houthi positions in a response to an appeal from Yemen’s President Abdurabuh Mansur Hadi, raising concerns of potential supply disruptions should the conflict engulf the rest of the Middle East. Although Yemen is not a major oil producer, the strike against Houthi rebels, who have forced the president to flee from Yemens capital city Sanaa, exacerbated fears of a local conflict since the rebels have received support from Iran, Saudi Arabias rival for dominance in the region.
Also, Yemen sits on a choke point, the Bab el-Mandeb, the closure of which would force tankers carrying Mideast crude to European and American markets to sail around South Africa instead of passing through the Suez Canal. And while this does not affect the delivery routes to Asian buyers, China is concerned because the Middle East accounts for a significant part of its crude oil imports.
Li Guofu, director of the Centre for Middle East Studies at the China Institute of International Studies, said for CNBC: “The Saudis have taken military action because they have said the Houthis are getting support from the Iranians. This is an indication that the war may gradually spread into a regional conflict.”
Bahrain, Qatar, the United Arab Emirates and Kuwait have also responded to President Hadis help request, while US President Barack Obama authorized the provision of logistical intelligence and support, the White House said.
Saudi Arabia has accused Iran of spurring unrest in Yemen, the latest confrontation between the two OPEC members. The airstrikes on Sanaa come after rebels marched on the southern port city of Aden. Jordanian officials said that its air force jets will take part in the operation as well, while the Saudi Press Agency also announced the support of Sudan, Morocco, Egypt and Pakistan.
Global supplies
However, many investors didnt see the air strikes as an immediate threat to Mideast production exports, and in the meantime the global market remains oversupplied.
Data by the Energy Information Administration showed on Wednesday that US crude oil inventories rose by 8.170 million barrels to 466.7 million in the seven days ended March 20th, the highest in at least 80 years, while stockpiles at Cushing, Oklahoma jumped to 56.3 million barrels from 54.4 million a week earlier, the highest on weekly data spanning back to April 2004.
US crude oil production inched up by 3 000 barrels per day to 9.422 million bpd, the highest on weekly records started in January 1983.
Meanwhile, a report earlier in the week showed that leading OPEC producer Saudi Arabia was pumping about 10 million barrels per day of crude, near an all-time record. The Organization of the Petroleum Exporting Countries pumped 30.6 million barrels in February, exceeding its targeted production pace for a ninth straight month.
Pivot points
According to Binary Tribune’s daily analysis, WTI May futures’ central pivot point is at $48.56. In case the contract breaches the first resistance level at $50.11, it may rise to $51.02. Should the second key resistance be broken, the US benchmark may attempt to advance $52.57.
If the contract manages to breach the first key support at $47.65, it might come to test $46.10. With this second key support broken, movement to the downside could continue to $45.19.
Meanwhile, May Brent’s central pivot point is projected at $56.12. The contract will see its first resistance level at $57.53. If breached, it may rise and test $58.59. In case the second key resistance is broken, the European crude benchmark may attempt to advance $60.00.
If Brent penetrates the first key support at $55.06, it could continue down to test $53.65. With the second support broken, downside movement may extend to $52.59 per barrel.
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