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EIA: Yemen presents unique energy risk

Strait near Yemen hosts as much as 3 million barrels of oil per day.

By
Daniel J. Graeber

WASHINGTON, April 23 (UPI) -- Conflict in Yemen may drag on the global crude oil market, not because of production, but because of strategic waterways, U.S. analysis said Thursday.

Saudi Arabia this week announced an end to a pan-Arab air campaign in Yemen dubbed "Decisive Storm." The offensive was meant to ensure political stability in a Yemen under threat from the Houthi rebel group, which has backing from the Shiite government in Iran.

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Yemeni President Abdu Rabbu Mansour Hadi fled the country to Saudi Arabia. Riyadh through its official news agency announced it was transitioning to a counter-terrorism and political effort called "Restore Hope."

Norwegian energy company DNO stopped work in Yemen last month because of the tense security situation in the country. Prior to the announcement, the company said it was producing around 1,950 barrels of oil per day from two reserve interests in the country.

Last week, a degradation in security in the industrial port town of Balfhaf forced company Yemen LNG to stop production and exports. The company has headquarters in the capital, Sanaa, which was seized by the Houthi rebel group earlier this year.

A briefing Thursday from the U.S. Energy Information Administration said port activity may be the greatest security interest for the regional energy sector. EIA said instability around the Bab el-Mandab shipping channel creates unique risks. Threats to the waterway, through which more than 3 million barrels of oil passes per day, means shippers would have to go around the southern tip of Africa.

"In addition, European and North African southbound oil flows could no longer take the most direct route to Asian markets through the Suez Canal and then on to the Bab el-Mandeb," EIA said. "As the security situation in Yemen has continued to deteriorate, the United States has heightened maritime security in the area, and has announced its intention to work with Gulf Cooperation Council partners to ensure the continued flow of commerce though the strait."

The USS Theodore Roosevelt was escorted by the guided-missile cruiser USS Normandy to its new positions in the Gulf of Aden, the Strait of Bab-el-Mandeb and the Southern Red Sea to conduct security operations earlier this week.

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