Crude oil prices jump after Saudi Arabia temporarily suspends shipments through the Bab al-Mandeb strait

Yemen backed Iran-aligned Houthi movement attacked two of its Very Large Crude Carriers, one of which suffered minor damages.

With Saudi Arabia, the world’s largest producer of crude oil, suspending the shipment of crude through the strategic Red Sea shipping lane, prices of Brent crude extended their gains 3 days in a row. Data showed U.S. inventories falling to their to a 3-1/2 year low as well.

Yesterday, Brent crude futures had shot up by 0.6%, by 47 cents, to $74.40 a barrel by 0247 GMT. On Thursday, U.S. West Texas Intermediate crude futures were up 5 cents at $69.35 a barrel, having registered more than 1% gain on Wednesday.

“The announcement this morning that the Saudis have closed some shipping lanes in the Gulf because of rebel Houthi attacks also gives the bulls something to launch off,” opined Greg McKenna, chief market strategist at AxiTrader, while pointing to lower U.S. inventories.

On Thursday, Saudi Arabia announced it was “temporarily halting” all oil shipments through the Red Sea shipping lane of Bab al-Mandeb following an attack on two of its big oil tankers by Yemen’s Iran-aligned Houthi movement.

Saudi Arabia’s Energy Minister Khalid al-Falih stated, the Houthis had attacked two Very Large Crude Carriers belonging to the Kingdom, in the Red Sea on Wednesday morning, one of which sustained minor damages.

“Saudi Arabia is temporarily halting all oil shipments through Bab al-Mandeb Strait immediately until the situation becomes clearer and the maritime transit through Bab al-Mandeb is safe,” said Khalid al-Falih.

Incidentally, the bulk of the Gulf’s oil exports transit the Suez Canal; the SUMED Pipeline also pass through Bab al-Mandeb strait.

According to data from the U.S. Energy Information Administration, in 2016, an estimated 4.8 million barrels per day of crude oil and refined petroleum products flowed through this waterway on their route to Europe, Asia, and the United States.

Since the Bab al-Mandeb strait, is only 12 miles (20 km) wide, transiting ships become a soft target.

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