The Energy Report: Houthi’s Last Stand

President Trump sent a clear message to Yemen’s Iranian-backed Houthis rebels saying that, “Your time is up, and your attacks must stop, starting today. If they don’t, Hell will rain down upon you like nothing you have ever seen before."

In relation to oil, the combination of increased stimulus from China and the heightened attack by the Houthi rebels is providing a significant boost this morning. China’s State Council on Sunday unveiled what it called a “special action plan” to boost domestic consumption, featuring measures including increasing residents’ income and establishing a childcare subsidy scheme according to Reuters. This set a surge of buying in the beleaguered grain markets and helped boost oil.

The Houthi rebels have escalated their activities, claiming responsibility for attacks on U.S. warships in response to airstrikes ordered by President Donald Trump. The Houthi leader has announced a ban on maritime shipping in the Red Sea, which includes U.S. ships.

U.S. Secretary of State Rubio has stated that the Houthis would not possess the capability to attack shipping without support from Iran. He also mentioned that the strikes in Yemen are crucial to prevent the Houthis from attacking global shipping and the U.S. Navy. Currently, there is no discussion of U.S. ground raids in Yemen as there appears to be no immediate need. Rubio emphasized that the U.S. military campaign in Yemen will continue until the Houthis can no longer strike ships.

U.S. Defense Secretary Hegseth affirmed that strikes against the Houthis will persist until there is an assurance that attacks on ships and assets have ceased. He pointed out that Iran has been supporting the Houthis for an extended period and needs to withdraw its support. Meanwhile, the top commander of the Iranian Revolutionary Guard, Salami, asserted that the Houthis in Yemen make strategic and operational decisions independently.

It seems that Iran provides missiles, money, and equipment with the expectation that they will not be used. The Iranians use a similar explanation regarding the Houthi rebels as they do for Hamas. They state that while they provide financial and material support, it is up to the recipients to decide how to use it, suggesting that they are not directly responsible for the actions taken with the supplied resources.

Iran intends to respond to U.S. President Donald Trump’s invitation to talks after a thorough examination, Reuters reports. The foreign ministry stated on Monday that actions taken by Washington do not align with their statements. Iran’s Supreme Leader Ayatollah Ali Khamenei and President Masoud Pezeshkian have rejected Trump’s letter and public exhortations for nuclear talks as deceptive and bullying.

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I think the combination of increased geopolitical risk factors as well as tightening of supplies and the possibility of Chinese stimulus really puts oil back on track for a run back to the mid-70s with a test perhaps of 80 as we get into summer crack spreads for gasoline and diesel are starting to look very bullish. It’s the refineries that are going to have to ramp up ahead of the summer driving season.

Peace talks are moving forward according to President Trump, but the war goes on. Reports say that Russia’s largest refinery was just hit. 50% of Moscow’s fuel supply is at risk after a drone struck the country’s largest refinery.

Natural gas is getting a big rally as winter returns with a vengeance. Below-normal temperatures over a big swath of the country is keeping the pressure on the inventories that are well below the five-year average and obviously much lower than anyone believed they could get to it this time of year. Bloomberg is reporting that Azerbaijan will on Monday sign agreements to explore for natural gas in Israeli waters, highlighting a key strategic alliance between the two countries amid turbulence in the region.

A consortium of Azeri state company Socar, BP (NYSE:BP) Plc, and Israel’s NewMed Energy LP will get the right to explore in one offshore block, in a signing overseen by Azerbaijan Economy Minister Mikayil Jabbarov and Israeli Energy Minister Eli Cohen, according to the Israeli energy ministry. The agreement gives Socar another foothold in important Israeli assets after the company bought a 10% stake in the Tamar gas field earlier this year. The deal comes at a time when Israel has been trying to deepen ties with Azerbaijan to help counter neighboring Iran. Israel and Azerbaijan are also dependent on each other for energy and defense equipment. Baku has maintained relations with Prime Minister Benjamin Netanyahu’s government as the war in the Middle East has pitted Israel against Iran and the militant groups it backs.

Written By: Phil Flynn