Houthis' Mokha Seizure Pushes Global Crude Oil Prices Towards $120/Bbl
The global crude oil market has seen significant changes in dynamics following Yemen's Iran-backed Houthis seizing the strategic Red Sea port city of Mokha from Saudi-backed pro-government forces.
This move has sent crude oil prices soaring to their highest level since May, with Brent trading above $108 and WTI at over $103. The recent surge marks a 23% increase in September alone and an impressive 78% growth year-to-date.
The constraints at the Yanbu terminal and threats of attacks in the Red Sea have reduced vessel availability for exports, leading to increased war-risk insurance and freight costs. As a result, normal arbitrage is weakened, preventing surplus barrels from reaching deficit markets quickly.
The global oil balance is tightening, with supplies remaining short by around 10-11 million barrels during August. The latest developments will further deplete global reserves, particularly affecting oil flows from Saudi Arabia and Russia.
Saudi Arabia's crude production in August fell to 6.238 million bpd, the lowest since 1990, while its exports dropped to about 3 million bpd, a nine-year low. The loss of around 2 million bpd from crude exports in the Middle East and another 2 million bpd from Russia due to Ukraine's drone attacks has contributed to the global oil market tightening.
The Strait of Hormuz remains disrupted, with both Iran and the U.S. continuing their resurgence of strikes. The conflict is now entering its seventh month, making it unlikely for a short-term deal to open up the Strait for commercial shipping.