Crude oil prices hit 7-year peak after Middle-east attacks

by   |  VIEW 2603

Crude oil prices hit 7-year peak after Middle-east attacks

On Tuesday, both US WTI (West Texas Intermediate) and Brent crude oil futures’ prices had soared to their strongest in more than seven years as an ongoing fret of a supply lag had exacerbated further following attacks in the Middle East.

If truth is to be told, in the day’s steep gains in global crude oil benchmarks were largely catapulted by a series of attacks in the Middle East, which eventually had casted further glooms on an already bottlenecked supply outlook.

In factuality, concerns over a potential supply-crunch accelerated sharply earlier this week after Yemeni Houthis had attacked the UAE, worsening a long-running history of military hostility between the Iran-backed group and Saudi-led coalition.

On top of that, followed by the Houthi attack on UAE that set off explosions in fuel tankers and led to the death of three people, the Iran-backed Yemeni group had cautioned that it would target more oil facilities. While as an inevitable repercussion, UAE was quoted saying that it had the rights to “respond to the terrorist attacks,” latest strike on a leading Arab ally of the United States would more likely to add to hindrances on an ongoing nuclear talk between Washington and Tehran, which in effect would spur up a steep supply glut further with global economic activities clawing back sharply following a two-year long stagnation.

Nonetheless, shortly after the attack on Abu Dhabi, a milita group backed by UAE and its stronger ally Saudi had reportedly launched a retaliatory attack and bombed the Yemeni capital, clouding supply outlook further.

Besides, Goldman Sachs had projected on Tuesday that global crude inventories would tumble to the lowest since 2000s this year, offering further impetus for market participants to jump on the bandwagon of a mass-scale buying frenzy.

Oil jumps after Houthi attack on UAE

Citing statistics, in the day’s commodity market wind down, UK crude rose 0.4 per cent to $86.83 per barrel, while US WTI crude oil contracts added 1.1 per cent to $84.70, though both benchmarks had breached their highest level since October 2014 earlier in the session.

UK crude jumped to $88.13 a barrel and US WTI soared to $85.74 per barrel shortly after the attacks. Meanwhile, addressing to possibilities of further supply disruption earlier in 2022, a senior oil market analyst at Rystad Energy, Louise Dickson said, “The damage to the UAE oil facilities in Abu Dhabi is not significant in itself, but it raises the question of even more supply disruptions in the region in 2022.

The attack raises the geopolitical risk in the region and may signal the Iran-U.S. nuclear deal is off the table for the foreseeable future, meaning Iranian oil barrels are off the market, boosting demand for similar grade crude originating elsewhere.