Crude oil at $120/bbl? Mirae Asset Sharekhan explains why this is possible

 The global witnessed yet another change in the underlying dynamics after Yemen’s Iran-backed Houthis seized the strategic Red Sea port city of Mokha from Saudi-backed pro-government forces and are advancing to take full control of the southern gateway to a major trade route linking Asia and Europe on the coastline of the Red Sea. The move has sent crude oil prices to the highest level since May this year; Brent trades above $108, and WTI trades above $103, and both benchmarks have surged 23 per cent in September, along with gains of around 78 per cent YTD. The constraints at the Yanbu terminal (5 mb/d of export capacity) and threats of attacks in the Red Sea have reduced vessel availability for exports. War-risk insurance and freight costs have also surged. High transport costs weaken normal arbitrage and prevent surplus barrels in one region from reaching a deficit market quickly.