Oil prices surge after Saudi air strikes in Yemen

Brent crude oil pared early gains but still rose more than 4 percent towards $59 a barrel on Thursday after Saudi Arabia and its Gulf Arab allies began a military operation in Yemen. The air strikes against Houthi rebels, who have driven the president from Yemen’s capital Sanaa, could stoke concerns about the security of Middle East oil shipments.

Brent futures were up $2.39 at $58.

87 by 0923 GMT, off a session high of $59.78.

US crude was up $2.18 at

Brent crude oil pared early gains but still rose more than 4 percent towards $59 a barrel on Thursday after Saudi Arabia and its Gulf Arab allies began a military operation in Yemen.

The air strikes against Houthi rebels, who have driven the president from Yemenand#39s capital Sanaa, could stoke concerns about the security of Middle East oil shipments.

Brent futures were up $2.

39 at $58.87 by 0923 GMT, off a session high of $59.

78. US crude was up $2.

18 at $51.39 a barrel, having reached $52.

48 earlier in the session.

andquoteopolitical risk like this has been on the back burner for a while because weand#39ve been focusing on global oversupply,andquot said Ole Hansen, head of commodity strategy at Saxo Bank.

andquotThis news has not made the oversupply go away. The upside potential is limited unless something escalates.

We need to see how this unfolds over the next couple of days,andquot he said.

The risk from the attack in Yemen was heightened because the Shiite Houthis have received some support from Iran, Saudi Arabiaand#39s long-time rival for dominance in the Middle East.

The Iranian Foreign Ministry demanded an immediate halt to all military andquotaggressionsandquot in Yemen, the semi-official Fars news agency reported.

A ground offensive may be needed to restore order in Yemen, a Saudi source familiar with defense matters said.

In order to export to Europe, Arab producers have to ship oil past Yemenand#39s coastlines via the Gulf of Aden to get to the Suez Canal.

The waters between Yemen and Djibouti, known as Bab el-Mandeb, are less than 40 kilomters (25 miles) wide.

They are considered a andquotchokepointandquot to global oil supplies by the US Energy Information Administration (EIA).

The EIA estimates that 38 million barrels a day of crude oil passed through Bab el-Mandeb in 2013, the latest year for which estimates were available.

The region is heavily populated with Western military forces. The United States and France operate large military bases in Djibouti.

NATOand#39s anti-piracy fleet also operates from the Gulf of Aden.

Chinaand#39s Foreign Ministry said it was deeply concerned about the worsening situation in Yemen.

Some analysts, however, said the strikes could lead to more stability in the region, if they resolved the conflict in Yemen.

andquotIf this is a prelude to a bigger operation in the Middle East, that may lead to some stability in the region,andquot said Mari Iwashita, chief market economist at Tokyoand#39s SMBC Friend Securities.

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SOURCE: Today’s Zaman