Oil prices hit 7-year highs as tight supply bites
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[January 18, 2022] By
Shadia Nasralla and Rowena Edwards
LONDON (Reuters) -Benchmark oil prices
climbed to their highest level since 2014 on Tuesday as possible supply
disruption after attacks in the Mideast Gulf added to an already tight
supply outlook.
Brent crude futures rose $0.88, or 1%, to $87.36 a barrel by 1154 GMT,
while U.S. West Texas Intermediate (WTI) crude futures jumped $1.23, or
1.5%, to $85.05 a barrel. Trade on Monday was subdued as it was a U.S.
public holiday.
Both benchmarks touched their highest levels since October 2014 earlier
in Tuesday's session.
Supply concerns have risen 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.
After launching drone and missile strikes which 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".
UAE oil firm 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.
Also adding to geopolitical price premiums are rising tensions between
OPEC+ member Russia and Ukraine.
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Oil pump jacks are seen at the Vaca Muerta shale oil and gas
deposit in the Patagonian province of Neuquen, Argentina, January
21, 2019. REUTERS/Agustin Marcarian/File Photo
In addition, some producers within the Organization of the Petroleum Exporting
Countries (OPEC) are struggling to pump at their allowed capacities, due to
underinvestment and outages, under an agreement with Russia and allies to add
400,000 barrels per day each month.
Opec will release its January oil market report at 1230 GMT.
"The consensus is that the situation will not improve in the foreseeable future
and oil demand growth together with supply constraints is inevitably leading to
a tighter oil balance," PVM analyst Tamas Varga said.
Goldman Sachs analysts said they expected 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 Sonali Paul in Melbourne and Roslan Khasawneh in
Singapore; Editing by Susan Fenton, Kirsten Donovan)
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