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Title: Oil prices hit 7-year highs as tight supply bites

Jan 18, 2022 07:06AM ET

By: AnalysisWatch

Benchmark oil prices rose to their highest level since 2014 on Tuesday as possible supply disruptions due to attacks in the Middle East added to an already tight supply outlook.

At 1154 GMT, Brent crude futures were up $0.88, or 1%, at $87.36 a barrel, while US West Texas Intermediate (WTI) crude futures were up $1.23, or 1.5%, at $85.05 a barrel. Trading on Monday was subdued due to the holiday in the US.

Both benchmarks hit their highest levels since October 2014 at the start of Tuesday's trading.

Supply concerns have increased this week after Yemen's Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-allied group and a coalition led by Saudi Arabia.

Following drone and missile attacks that triggered explosions in tanker trucks and killed three people, the Houthi movement warned it could attack more facilities, while the UAE said it reserved the right to "respond to these terrorist attacks".

UAE oil company ADNOC said it had activated contingency plans to ensure uninterrupted supplies to its local and international customers following an incident at its fuel depot in Mussafah.

Rising tensions between OPEC+ members Russia and Ukraine are also contributing to geopolitical price premiums.

In addition, some producers within the Organisation of Petroleum Exporting Countries (OPEC) are struggling to meet their allowable production capacities due to underinvestment and outages. OPEC has agreed with Russia and its allies to produce an additional 440,000 barrels per day each month.

Opec will publish its oil market report for January at 1230 GMT.

Goldman Sachs analysts expect oil stocks in OECD countries to fall to their lowest level since 2000 by the summer, pushing Brent oil prices to $100 later this year.

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