Prices are rising despite this weekend bringing a two-month truce in Yemen, the first real progress in a war that’s waged on since 2014. Supply concerns have dampened the promising news of reduced instability in the Middle East. On Sunday the Saudi-led coalition that has been at war with Houthi rebels, generally believed to be backed by Iran, met to agree on a truce that would end the damage and bloodshed that has been going on for years. This is great news for US allies including Saudi Arabia and the UAE, which will now be able to focus their assets on other problems such as oil supply.
The truce comes after the United Nations brokered the agreement between the two sides this weekend. Surprisingly, the Houthi fighters welcomed the agreement according to the Saudi government, following a unilateral ceasefire by the Saudi-led coalition. It has been over seven years since the beginning of the conflict in Yemen that has seen over ten thousand killed and forced many millions into hunger. The last official meeting between the two sides occurred in 2016, so this historical meeting is one that will have impacts that are long-lasting. Houthi rebels have targeted Saudi Arabian and UAE oil production numerous times in the past, so the progress will help remove some risk premium from prices.
Across the pond, markets are still contending with Biden’s record-breaking 1 MMbpd release from strategic reserves for the next six months. Unfortunately, it seems that the release has done little to ease fears around the world regarding the ongoing conflict in Russia that seems to have no end in sight. Analysts are now suggesting that the release from the reserves in the U.S. will have little long-term effects on global oil prices, but immediate relief is being welcomed by Americans filling up their vehicles at gas stations. The EIA’s weekly retail price data shows an 8-10 cent drop from recent highs, so it is clear we are starting to see some slow results, even though full impacts of the release may not be seen for at least a few more weeks.