Oil prices on Tuesday climbed to their highest since 2014 as investors worried about global political tensions involving major producers such as the United Arab Emirates and Russia that could exacerbate the already tight supply outlook.
Futures for West Texas Intermediate, the main grade of U.S. crude, added $1.61 per barrel, or 1.9%, to $85.43 on Tuesday.
Which marks the highest closing level since October 2014, when oil prices were moving in the opposite direction as a gusher of U.S. crude flooded the market.
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Supply concerns mounted this week after Yemen’s Houthi group attacked the United Arab Emirates, escalating hostilities between the Iran-aligned group and a Saudi Arabian-led coalition. read more
After launching drone and missile strikes that set off explosions in fuel trucks and killed three people, the Houthi movement warned it could target more facilities, while the UAE said it reserved the right to “respond to these terrorist attacks.”
The strike on a leading Gulf Arab ally of the United States takes the war between the Houthi group and a Saudi-led coalition to a new level, and may hinder efforts to contain regional tensions as Washington and Tehran work to rescue a nuclear deal.
“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,” said Rystad Energy’s senior oil markets analyst Louise Dickson.
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UAE oil company ADNOC said it had activated business continuity plans to ensure uninterrupted supply of products to its local and international customers after an incident at its Mussafah fuel depot.
Separately, a senior U.S. State Department official said Russian troops deployed to Belarus for what Moscow and Minsk say will be joint military exercises is raising concerns that they “potentially” could be used to attack neighboring Ukraine.
Goldman Sachs analysts said they expect oil inventories in OECD countries to fall to their lowest since 2000 by the summer, with Brent oil prices rising to $100 later this year.
Additional reporting by Rowena Edwards and Noah Browning in London, Sonali Paul in Melbourne and Roslan Khasawneh in Singapore Editing by Marguerita Choy and David Gregorio.
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