Yemen, Iran And The Price Of Oil

Although the oil bulls attempted to use the news regarding a Saudi Arabian led coalition launching airstrikes in Yemen as a reason to push oil prices higher, the commodity has now erased all of its gains and this has not surprised me. Yemen was previously only seen as the 39th largest producer of oil, therefore the sudden gains we encountered late last week were always linked to a hypothetical situation that if other nations became involved in the on-going conflict it might disrupt oil production elsewhere. The keyword here is hypothetical, and there would really need to be evidence of oil production slowing for traders to become more interested.

Right now, there are no indications at all that the coalition-led airstrikes are going to disrupt oil production and this has contributed to the gains being erased.

The other major contributor to the oil markets commencing the week with a bearish momentum is that it appears negotiations on whether to relax nuclear sanctions against Iran are reaching the final stages, which could lead to a further one million barrels a day being pumped into the markets. Such increased inventories would pressure the already aggressive oversupply by around a third, and provide more than enough reason for the bears to squash oil prices lower.


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