Oil futures settled above $49 a barrel on Wednesday, at their highest level in more than two weeks, with turmoil in Yemen raising concerns over crude supplies in the Middle East. The news helped offset earlier pressure from a U.S. government report which showed crude supplies rose for the 11th straight week.
On the New York Mercantile Exchange, crude for delivery in May settled at $49.21 a barrel, up $1.70, or 3.6%. Prices had been trading around $48.23 shortly before the supply data, pared gains after it, then spiked higher just over an hour before the scheduled close of trading on Nymex. The settlement was the highest for a front-month contract since March 9. May Brent crude on London’s ICE Futures exchange rallied $1.37, or 2.5%, to $56.48 a barrel.
Western-backed President Abed Rabbo Mansour Hadi fled the southern city of Aden on Wednesday as Houthi militants came closer to seizing the city. Yemen is currently dominating the news in the oil market because the situation there threatens the stability of the oil chokepoint of Bab el-Mandab, said Richard Hastings, macro strategist at Global Hunter Securities. “The planet is destabilizing and everybody knows it — the el-Mandeb chokepoint is the entire story.”
A closure of the strait, a choke point between the Horn of Africa and the Middle East, could keep tankers in the Persian Gulf from reaching the Suez Canal and the SUMED Pipeline, according to a report from the U.S. Energy Information Administration. An estimated 3.8 million barrels a day of crude oil and refined petroleum products flowed through the waterway in 2013.
Earlier Wednesday, crude-supply data were in the spotlight. Early Wednesday, the EIA reported its 11th straight weekly increase crude supplies — up 8.2 million barrels for the week ended March 20. Some expectations that a deal between the West and Iran over Iran’s nuclear program won’t be reached this week is likely contributing to oil’s strength, said John Macaluso, research analyst at Tyche Capital Advisors. The market has been concerned that a deal would ease oil sanctions on Iran and add more barrels of crude to the global market.
Weakness in the U.S. dollar against the euro provided added support to dollar-denominated oil Wednesday.