Yemen Conflict Threatens Oil Supplies, Yet Prices Fall

The ongoing conflict in Yemen has led to a significant threat to Saudi oil exports, but surprisingly, oil prices have fallen instead of rising.

According to the International Energy Agency (IEA), the hit to global oil demand this year is expected to be comparable to the four largest shocks of the last 60 years, with diesel and feedstocks for petrochemical plants in Asia being particularly affected.

The IEA's latest data show that the global oil deficit has increased to an average of 1.7 million barrels per day this year, up from 1.3 million barrels per day in their previous report. Stockpiles are continuing to draw down in the fourth quarter instead of increasing as previously forecast.

The IEA's report suggests that the war in Yemen is having a bigger impact on oil supply than consumption, leading to a deeper-than-expected shortfall.