Oil prices soared on Friday morning after Saudi Arabia launched a military exercise near Yemen’s port city of Hodeidah. The move came as the United States was working with European nations to prevent further Iranian attacks after last week’s drone attacks on Saudi Arabian oil fields brought production to a screeching halt. Iran has denied any part in the drone attack, while Yemeni Houthi rebels have claimed responsibility, an assertion questioned by global leaders.
In retaliation for last week’s drone attacks, the Saudi-led coalition said that it had destroyed four sites used for building remote-controlled boats and sea mines in an effort to protect the freedom of maritime navigation. On Thursday night the coalition also claims to have intercepted and demolished a Yemeni boat filled with explosives. Houthi leaders condemned the Saudi military action, saying that it violated a U.N. agreement reached in Sweden last year, when a Hodeidah ceasefire and troop redeployment was discussed.
Saudi Arabia has committed to returning production to its former level of 12 million barrels per day by the end of November, but until that time, supply has been significantly disrupted. U.S. President Trump has announced plans to use reserves if needed.
U.S. WTI inched up on Thursday and Brent saw more generous gains after two days of price declines. U.S. WTI futures were up 0.95 percent as of 1:12 p.m. HK/SIN on Friday, to $58.68 per barrel. Brent futures were up 0.47 percent to $64.70. Oil prices are set to see their biggest weeks of gains this week since January 2019 and are expected to end the week some 7 percent higher than last week’s close.
On the currency markets, the U.S. dollar erased the bounce it saw after the Federal Reserve announced an interest rate cut on Wednesday. The dollar index was down 0.05 percent in the early Asian afternoon, to 98.22 .DXY. The dollar eased 0.15 percent against the yen, trading at 107.86. The sterling soared against the dollar, up 0.30 percent to $1.2562, surpassing the two-month high of $1.2560, while the euro gained 0.14 percent against the greenback to $1.1055. The dollar’s struggle came after the Swiss and British central banks held interest rates on Thursday, rather than cutting them like the Fed did.