EconSource: Oil Prices Ease as Market Downplays Supply Threat from Yemen

Oil prices fell over a percentage point on Friday as traders estimated that the threat of a disruption to world crude supplies from Saudi Arabia-led air strikes in Yemen was low. Goldman Sachs further explained that the strikes in Yemen would have little effect on oil supplies as the country was only a small crude exporter and tankers could avoid passing its waters to reach their ports of destination. Closure of the strait could affect 3.8 million barrels a day of crude and product flows, but analysts said tankers could be diverted to travel around Africa, instead of passing by Yemen. [Reuters, 3/27/2015]

Iraq oil minister sees $70 crude by end 2015  
Iraq’s Oil Minister Adel Abdel Mehdi predicted that world oil prices could reach $70 a barrel by the end of 2015 and played down the impact of the emerging conflict in Yemen on prices. A global slump in oil prices has slashed government revenue in Iraq, prompting the OPEC producer to renegotiate contracts with oil majors as it faces a costly military campaign against Islamic State (ISIS or ISIL) militants. International firms operate in Iraq’s southern oilfields under service contracts, currently based on a fixed dollar fee for additional volumes produced–a formula that has seen Baghdad’s bills balloon just as its oil revenue collapses. [Reuters, 3/26/2015]

IMF postpones Yemen loan program for now
The International Monetary Fund (IMF) on Thursday said it was postponing its next review of its $553 million loan program to Yemen given the uncertain situation in the country. The IMF agreed in July to provide Yemen the loan over the next three years after the government pledged economic reforms. But the government’s plans have been derailed by an increasingly unstable political situation. [Reuters, 3/26/2015]

Saudi drawing down foreign reserves to cover deficit
Data from the Saudi central bank indicates that Saudi Arabia has begun drawing down its foreign currency reserves for the first time since 2009 to cover a record state budget deficit caused by the plunge in oil prices. Analysts believe that while some of the recent fall is due to the strong US dollar, which has eroded the value of non-dollar assets, Saudi Arabia has stopped putting new money into the reserves on a net basis and is instead taking out money. Saudi officials have insisted they will not cut spending sharply because of the need to keep the economy growing and sustain social welfare payments, which are key to maintaining political stability. [Reuters, 3/26/2015]

Also of interest:
Why does Yemen matter to the World’s oil market? | WSJ
Increased confidence in Jordan’s currency | Al-Monitor
Egypt terror attacks fail to scare investors | Al-Monitor
Egypt offers land to build EGP500 million trade zone in Gharbiya | Amwal Al Ghad