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Oil: Crude price reaches seven-year high due to supply shortage

Lima, January 18, 2022Updated on 01/18/2022 11:30 am

Benchmark crude prices hit their highest since 2014 on Tuesday as potential supply disruptions following the attacks in the Persian Gulf added to an already tight supply outlook.

At 10:15 GMT, futures on the raw Brent rose 79 cents, or 0.91%, to $87.25 a barrel, while West Texas Intermediate crudes rose 79 cents, or 0.91%, to $87.25 a barrel. U.S (WTI) rose $1.19, or 1.42%, to $85.05 a barrel.

Trading on Monday was moderated as it was a holiday in U.S. Both benchmark indexes hit their highest levels since October 2014 on Tuesday.

Supply concerns increased this week after Yemen’s Houthis attacked the United Arab Emirates, intensifying hostilities between the Iran-aligned group and a Saudi-led coalition.

The Emirati oil company ADNOC said it activated business continuity plans to ensure the uninterrupted supply of products to its local and international customers following an incident at its Mussafah fuel depot.

Rising tensions between OPEC+ member Russia and Ukraine have also contributed to increasing the geopolitical price premium.

“The consensus is that the situation will not improve in the foreseeable future and the growth in demand for Petroleum coupled with supply constraints is inevitably leading to a tighter oil balance”said Tamas Varga, an analyst at PVM.

Goldman Sachs analysts said they expect oil inventories in OECD countries to fall to their lowest level since 2000 by the summer, and Brent prices to rise to $100 by the end of this year.

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