The global oil market is once again in flux as geopolitics and regional conflicts take an increasingly heavy toll on oil supplies. Since the OPEC meeting in Vienna, warning signs that oil markets are heading for a shortage in supply, due to low spare production capacity and growing security threats in and around the Persian Gulf, have not been taken into account.
The perceived oil production increase from the OPEC and Russia agreement has not materialized in full. Analysts are even reporting that the spare production capacity of Saudi Arabia is less than 500,000 bpd.
This lack of production capacity must now become a major point of focus as, in addition to the ongoing Iran-U.S. confrontation in the Strait of Hormuz, Iranian backed Yemeni Houthi rebels have once again attacked Saudi oil tankers in the Red Sea. In response, Saudi Arabia has suspended oil shipments through the Bab El-Mandeb Strait for an undisclosed period of time.
Aramco stated that “in the interest of the safety of ships and their crews and to avoid the risk of oil spill, Saudi Aramco has temporarily halted all oil shipments through Bab El-Mandeb with immediate effect. The Company is carefully assessing the situation and will take further action as prudence demands”.
Even though no casualties have been reported, the current situation is undeniably dangerous and has been escalating this year.
So far in 2018, the Houthis have threatened to increase their attacks on Saudi or Arab Alliance owned vessels. On April 3, a Saudi tanker was shot at with a projectile from Houthi fighters. Several other Houthi attacks have been reported against commercial vessels in the Red Sea and Bab El Mandeb area lately.
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