The recent developments in Yemen have caused oil prices to jump on fears of disruption to supplies. However the impact on production should be minimal and even in the unlikely event of transport routes being affected, it should only add around $3-4 onto the price of a barrel of oil. Admittedly, the threat of disruptions to oil shipments that pass through the Bab el-Mandeb Strait, located between Yemen and Djibouti is more serious. Even if fighting did progress south and make it too dangerous for ships to traverse the Bab el-Mandeb Strait, oil transporters could simply make the longer journey around Africa.This would add around $3 – $4 per barrel onto transport costs and add about 10 days extra onto a typical journey from the Middle East to Northern Europe. But it certainly wouldn’t be disastrous and the West could always draw on ample stockpiles of crude oil held in strategic reserves in the US and elsewhere if it needed to. “The upshot is that Saudi intervention in Yemen should not have any material impact on oil supplies. Oil prices may remain elevated for the next few weeks as tensions remain high, but unless fighting reaches the Bab el-Mandeb Strait, prices are likely to remain weak.” – Capital Economics notes in a report on Thursday
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