Al Qaeda is back on the minds of energy traders after they took control of the major Riyan Airport and the Dhabah oil terminal on the Arabian Sea Coast, which is in the southern part of Yemen. Crude oil prices surged on the uncertainty as the group Al Qaeda in the Arabian Peninsula (AQAP) moved to take advantage of the chaos in the civil war between the Houthis youth militia movement--supported by Iran and the Yemeni government that is in tatters, and supported by a coalition led by Saudi Arabia in a country that was once touted as an Obama Administration foreign policy success. Instead of Al Qaeda being on the run, they are running wild in Yemen posing a great risk to the West and adding to the worries about oil transportation around Yemen.
Oil prices were down almost a dollar when the news broke and rallied to get higher on the day for the highest closing price of the year. Prices overnight fell back because of the fact that the globe is still well supplied with oil but also doubts that, at least in the near term, that this will disrupt flows of oil. Yet the market still is trying to assess the extent of the drop in U.S. production. All of the major reporting agencies have acknowledged that U.S. production will fall,and how fast that happens may be the determining factor in short-term price moves. That will give added importance to today's weekly Baker Hugs rig count--which does matter-- especially as we see no sign of a slowing in the U.S. sector!
For example, oil field services firm Schlumberger announced it will lay off another 11,000 workers in what looks like the beginning of a second major wave of layoffs across the oil industry, according to Fuel Fix. "The move will bring Schlumberger's layoffs up to 20,000 employees, roughly 15% of its workforce, since it began paring back its payroll earlier this year to cope with low oil prices. The nine-month oil slump has cost the energy industry more than 120,000 jobs so far, according to oil field staffing firm Swift Worldwide Resources.