Oil Prices rose for the second consecutive day after Saudi Arabia, the world’s biggest exporter, and her allies launched air strikes on Muslim rebel targets in Yemen.
Brent, the global benchmark, jumped nearly 6% after the news to $59.78 a barrel on the London-based ICE Futures Exchange but later pared gains to trade at $57.88 a barrel after the dollar rebounded from Wednesday’s selloff. This is still the highest it has been in more than 2 weeks.
A stronger dollar makes dollar denominated commodities like oil more expensive to holders of other currencies.
Light, sweet crude oil for April delivery, the US benchmark, advanced $1.70 to $50.91 a barrel after highs of $52.81 a barrel earlier on the New York Mercantile Exchange.
“A lot of times you get the market reacting dramatically right off the bat to events like these, before people begin putting things in perspective after a greater study of the risks involved,” Phil Flynn, analyst at the Price Futures Group in Chicago, told Reuters.
“A growing realization, however, is that the oversupply in crude may not be the only thing in pricing oil,” He added.
The strikes, which led to speculation that regional conflict could disrupt supplies, were targeted on rebels believed to be supported by the Iranian government trying to topple Yemen’s president.
Yemen itself produces very little oil to be an important player in the determination of prices, but it occupies a strategic position on some of the most important energy routes.
Information from the US Energy Information Administration estimates that more than 7% of the global oil maritime trade passes by its coast.
“Any headline that reads ‘Saudi airstrikes target Iranian backed rebels’ should get your attention,” analysts at Tudor, Pickering, Holt & Co., an energy investment bank in Houston, told the Wall Street Journal .
“When Big Boys start firing missiles in the Middle East, the oil markets take note.”
To contact the reporter of the story: Jonathan Millet at firstname.lastname@example.org