Why is the oil price rising today? That was the question Rigzone asked Tamas Varga, an analyst at PVM Oil Associates, and Rebecca Babin, a senior equity trader for CIBC Private Wealth in New York.
Responding to the query, Varga told Rigzone, “after Houthi rebels launched an attack on Israel’s Ben-Gurion airport, Israeli planes struck Houthi targets in Yemen leading to a jump in geopolitical risk premium, hence the rally”.
In a video posted on the Associated Press website on May 5, Yahya Saree, who the video describes as the “Houthi military spokesman”, states, “the Yemeni Armed Forces announce that they will work to impose a comprehensive aerial blockade on the Israeli enemy by repeatedly targeting airports, foremost among them Lod airport, named by Israel as Ben-Gurion airport”. The video included subtitles. Saree describes himself on his X page as the “spokesperson of the Yemeni Armed Forces”.
In a statement posted on its X page on May 6, Israel Defense Forces (IDF) said IDF fighter jets “struck and dismantled” Houthi infrastructure at the “main airport in Sana’a”. The IDF added in the statement that “several central power plants were struck in, and surrounding, the Sana’a area”.
A statement posted on the IDF’s X page on May 5 announced that IAF fighter jets struck Houthi targets along the Yemen coastline.
In her response to Rigzone’s question, Babin said, “crude is up today largely because the market was very short heading into the OPEC meeting – not just on flat price, but particularly through put spreads”.
“While the 400,000 barrel per day increase from OPEC was widely expected, some participants were positioning for a more aggressive signal – specifically, guidance toward a full unwind of the 2.2 million barrel per day cut by October, which didn’t materialize,” Babin added.
“The relatively muted outcome triggered a fair amount of short covering, especially as the market had been leaning into the idea that this meeting could push WTI below $55 and establish a new, lower range,” Babin went on to state.
Babin told Rigzone that, “also supporting prices today is speculation that China may announce additional stimulus on Wednesday, following the unusual move by the government to schedule a press conference – raising hopes for further policy support”.
Babin went on to add that “commentary from U.S. producers may also be helping”.
“Lower capex and commentary that U.S. shale may be peaking (FANG) [Diamondback Energy] – this obviously does not impact supply immediately but maybe providing more confidence there is a floor in crude as U.S. production slows,” Babin added.
Rigzone has contacted OPEC, the State Council of the People’s Republic of China, the American Petroleum Institute (API), and Diamondback Energy for comment on Babin’s statement. At the time of writing, none of the above have responded to Rigzone.
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