March 27th 2015
Oil jumped about 5 percent on Thursday, the biggest daily gain in a month, as air strikes in Yemen by Saudi Arabia and its Gulf Arab allies sparked fears that escalation of the Middle East battle could disrupt world crude supplies.
The Saudi military operation against the Iran-backed Houthi rebels, who have driven Yemen’s president from the capital Sanaa, has not affected oil facilities of major Gulf producers.
But fears the conflict could spread and disrupt Middle East shipments powered benchmark Brent oil to near $60 a barrel, in its biggest daily gain since Feb. 25.
U.S. West Texas Intermediate (WTI) crude soared above $50, approaching 2015 highs.
Some analysts said the chance of an all-out proxy war between the Saudis and Iran looked remote. They attributed some of Thursday’s rally in oil to short covering after steep losses in early March, and said gains should be brief as worries about a supply glut linger in the market.
“You don’t want to be short oil when there are stories about bombings next door to Saudi Arabia, even if it’s the Saudis who are leading the charge,” said Joseph Posillico, senior vice president of energy futures at Jefferies in New York.
“But with shorts squeezed out of the market, particularly those under $50 WTI, we are reassessing where to go. I personally don’t think this rally has legs as fundamentally nothing’s changed.”
Oil prices jumped more than $3 at their highs, but pared some gains after the dollar rebounded.