Oil prices firmed after Islamic State militants overran the western city of Ramadi in the biggest defeat for the Iraqi government since last summer. As Sonia Legg reports, the end of a ceasefire in Yemen is also having an impact.
Iraqi military vehicles flee Ramadi after Islamic State militants claim control of the city. Just another reason for oil prices to rise. Front-month Brent futures rose 7% and US crude was also up. Prices later fell back on forecasts of a high supply outlook. But CIBC's Jeremy Stretch says he expects the trend to be higher not lower (SOUNDBITE) (English) JEREMY STRETCH, HEAD OF FX STRATEGY AT CIBC, SAYING: "The medium term growth story remains reasonably constructive, obviously on the assumption that monetary policy will remain pretty expansionary for the majority of the world - perhaps outside the U.S. And I think that's maintaining a residual bid to the oil price as well, despite the Saudis maintaining a very healthy level of output and export." The Saudis air offensive in Yemen is also fuelling the increase. They've been trying to defeat Houthi Shiite rebels who've taken over large swathes of the country. The end of a five-day ceasefire led to panic buying in the capital Sanaa. (SOUNDBITE) (Arabic) SANAA RESIDENT, MOHAMMED AL-DHOLIMI, SAYING: "There is barely any fuel, and when it is made available there is only one or two percent of what is needed. Those with weapons and influence take it all, the rest of us end up with very little." Saudi Arabia says Tehran is funding the rebels in Yemen. But Iran's Foreign Minister Mohammad Javad Zarif says it's time the U.N. intervened. (SOUNDBITE) (English) IRANIAN FOREIGN MINISTER MOHAMMAD JAVAD ZARIF ON YEMEN SAYING: "The targets in most areas have been civilian areas and it is regrettable that that has continued. It is also regrettable that humanitarian assistance has failed to reach the people of Yemen who are in dire need of humanitarian assistance which has failed to reach the people of Yemen." Some aid has arrived in Yemen. But the Arab world's poorest country - is now on the brink of economic collapse.