Oil prices are up again as West Texas Intermediate crude climbed to over US$87 per barrel as Yemen’s Houthis pose a threat to widen Iran war. A declared blockade of Saudi Arabia by the Iranian-backed Houthis could further disrupt global oil supplies and international trade, experts say. “That’s now starting to disrupt some of the flows through the Red Sea, which had been one of the key workarounds that had kept oil prices I would say relatively in check,” said Randy Ollenberger, managing director for BMO Capital Markets. Ollenberger says Saudi Arabia has diverted around five to six million barrels of oil a day through the Bab el-Maneb Strait instead of being sent through the Strait of Hormuz. “That represent about six or seven million barrels a day of oil that would have otherwise been shut in,” Ollenberger said. He added those workarounds have helped offset oil that would be lost to closures at the Strait of Hormuz. But now, that alternative path is under threat. In early July, the cost of WTI crude hovered around $67 per barrel, down from its peak of over $115 in the April. On Wednesday, it shot up into the $87 range. Ollenberger said they are expected to move higher still. It remains to be seen what the fluctuation in oil price will mean for Alberta’s bottom line. In the latest budget, which was tabled in February, the Alberta government projected price of the North American benchmark WTI for US$60.50 per barrel. CTV News asked the province about its February forecast for oil revenue and is waiting on a reply. The province is slated to update the budget again by the end of August. The Houthis say they have closed the Bab el-Mandeb Strait to Saudi-linked shipping in retaliation for the kingdom’s blockade on Yemen and a recent attack on the airport in Yemen’s rebel-held capital, Sanaa. “The Houthis represent a segment that has been utilized by Iran to be able to challenge Saudi Arabia,” said Rob Huebert, who is the director at the University of Calgary’s Centre for Military Security and Strategic Studies. “What is clearly being indicated (is) that in this conflict, the Iranians have the ability to cause a lot more pain than in the immediate area than where the Americans are.” Bab el-Mandeb, which is at the southern tip of the Arabian Peninsula, is a vital shipping chokepoint, connecting the Red Sea to the Gulf of Aden. Around 12 per cent of the world’s trade — including a quarter of global container traffic — passes through its narrows, moving between Europe and Asia via Egypt’s Suez Canal. The Houthis say they will only stop vessels connected to Saudi Arabia or going in and out of its Red Sea ports. But during a similar blockade announced against Israel over the war in Gaza, the rebels attacked several vessels with little or no connection to that conflict. Ukraine targeting Russian oil also driving up costs The war between Russia and Ukraine is also having an impact on the cost of oil as Kyiv has targeted Russian oil facilities and set two oil tankers ablaze in the Sea of Azov in recent weeks. “That’s another factor. Russia exports petroleum products to Europe and other places,” Ollenberger said. “Ukraine successfully attacking and damaging some of those Russian refineries is also taking product off the market and making those product prices that much higher.” A Ukrainian drone strike sparked a fire at an oil depot in the western Russian city of Tver, according to acting governor Vitaly Korolyov. Oil reservoirs also were set ablaze by drones in Vyazniki, in the southern Stavropol region, said Stavropol Governor Vladimir Vladimirov, forcing the evacuation of nearby apartment buildings. In the Sea of Azov, Ukrainian drones set two oil tankers on fire, according to Rostov Governor Yuri Slusar, who said one of the ships was still burning and its crew evacuated.
