Oil prices go crazy as Saudis go to war in Yemen

There’s nothing like a scare about the safety of middle-eastern sea-lanes to send oil prices higher, particularly when the scare involves fears of a conflict between the region’s two biggest powers.

Crude oil prices were back at their highest in two weeks at $51.32 a barrel by mid-morning in Europe, after Saudi Arabia and its allies launched airstrikes against the Houthi rebels who have overrun much of Yemen, including a military airbase that was used until recently by U.S. forces.

Prices have now surged 8% in the last 48 hours. The impact of the flare-up has been magnified by the fact that many participants in the market have bet on prices staying low all through the year. Those caught in ‘short’ positions have had to cover those positions in a hurry as the price rebounds. Fundamentally, though, the market remains oversupplied, and U.S. stocks of crude and fuel are at record highs.

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