http://washpost.bloomberg.com/Story?docId=1376-NLSUN06K50Y101-4MMEVGDSL4845SF4QCO5J2DOH0
Why Bombing the 39th Biggest Oil Producer Is Roiling Markets
Sharon Cho and Ben SharplesMar 26, 2015 3:55 pm ET
(Updates oil prices in sixth paragraph.)
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 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 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 their advance.
“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 of 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.
Shipping Chokepoint
Brent, the benchmark grade for more than half the world’s crude, gained 4.8
percent to $59.19 on the London-based ICE Futures Europe exchange. West
Texas Intermediate futures, the U.S. marker, advanced 4.5 percent to $51.43
on the New York Mercantile Exchange.
Yemen is located on Bab el-Mandeb, the fourth-biggest shipping chokepoint
in the world by volume, which is 18 miles wide at its narrowest point,
according to the EIA. It’s located between Yemen, Djibouti, and Eritrea,
and connects the Red Sea with the Gulf of Aden and the Arabian Sea.
In 2013, 3.8 million barrels a day of crude and oil products flowed through
Bab el-Mandeb, EIA data show. More than half of the shipments moved to the
Suez Canal and SUMED Pipeline, which link Egypt’s ports of Ain Sukhna on
the Red Sea and Sidi Kerir on the Mediterranean.
“There is a possibility that pirates could use the general instability as
cover to mount attacks in the southern Red Sea around and north of Bab
el-Mandeb,” the Baltic and International Maritime Council, which represents
owners and operators in 130 countries, said by e-mail.
The oil terminal at Aden on Yemen’s south coast is operating as normal,
Harbor Master Shekib Abdelwahed said by phone Thursday. The European Union
Naval Force isn’t aware of any disruption to shipping in the Gulf of Aden
or Bab el-Mandeb, said Jacqui Sherriff, a spokeswoman for the combined
naval units.
Transport Threat
Closure of the waterway may keep tankers from the Persian Gulf from
reaching the Suez Canal and the SUMED Pipeline, diverting them around the
southern tip of Africa, adding to transit time and cost, according to the
EIA. Ships carrying oil from Europe and North Africa to Asian market
wouldn’t be able to take the most direct route, it said on its website.
“As the situation in Yemen has dramatically escalated, it’s seen primarily
as a threat to international shipping and oil transport,” Theodore Karasik,
an independent geopolitical analyst, said from Dubai. “There’s concern that
the more ungovernable Yemen becomes, the more it could become a base for
piracy in the Red Sea area.”
Saudi Arabia, the United Arab Emirates, Bahrain, Qatar and Kuwait responded
to a request from Yemen’s President Abdurabuh Mansur Hadi, according to a
statement carried by the official Saudi Press Agency.
The strikes are a “very dangerous development” and contradict international
law, al-Jazeera reported, citing the Iranian foreign ministry. The attacks
will haunt Saudi Arabia as the war won’t be contained in one area, the
state-run Fars news agency cited Alaeddin Boroujerdi, head of the Iranian
parliament’s national security and foreign policy committee, as saying.
Proxy War
Saudi Arabia led OPEC’s decision in November to resist calls to reduce its
output target of 30 million barrels a day, a resolution that Iranian Oil
Minister Bijan Namdar Zanganeh said was “not in line with what we wanted.”
OPEC’s decision, combined with the highest rate of U.S. production in more
than 30 years, caused a supply glut that drove benchmark oil prices to
six-year lows.
In Yemen, Iran and Saudi Arabia are “fighting a proxy war and they will
continue to fight a proxy war,” Vautrain said.
The Houthis, who follow the Zaydi branch of Shiite Islam, say they operate
independently of Iran and represent only their group’s interests.
--With assistance from Yee Kai Pin, Ann Koh and Ovais Subhani in Singapore,
Rupert Rowling and Naomi Christie in London, Anthony DiPaola in Dubai and
Maher Chmaytelli in Paris.
Received on Thu Mar 26 2015 - 20:55:52 EDT