Crude oil hits highest level since 2014 following Houthi attack in UAE

• Brent crude futures rose 0.9% to $87.24 per barrel

• U.S. West Texas Intermediate futures jumped 1.6% to $85.16 per barrel

Crude prices hit their highest level in seven years since 2014 after the demand for the fuel outweighed the strained supplies.

International benchmark Brent crude futures rose 0.9% to $87.24 per barrel, while U.S. West Texas Intermediate futures jumped 1.6% to $85.16 per barrel. Both oil contracts notched their highest level since October 2014 earlier in the day after a subdued trading day on Monday as U.S. markets were closed for a public holiday, reported CNBC.

Geopolitics and strained supplies

The attack by Houthi militants on United Arab Emirates (UAE) capital, Abu Dhabi, on Monday, brewed up fresh tensions in the region pushing the oil prices to their highest level since 2014. 

UAE condemned the attack and has vowed to retaliate against Houthi militants for the attack that left three people dead. 

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In a statement following the attacks, the UAE’s Ministry of Foreign Affairs said, “We reiterate that those responsible for this unlawful targeting of our country will be held accountable.”

The ministry added that the UAE “reserves the right to respond to these terrorist attacks and criminal escalation.”

In addition to the rising geopolitical tensions in the Middle East, the fear of Omicron has also tightened oil supplies due to outages from Libya to North America. Thus traders are paying higher premiums for cargoes in Asia. 

Rising demand

The rise from the sudden crash in oil prices in March 2020 has been quicker than America’s resurgence as an oil-producing nation. 

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Oil demand rose by half a million barrels a day in December according to analysts at Goldman Sachs Group, due to gas-to-oil switching at power stations in Europe and Asia. They forecast a further 300,000 barrel increase each day in January and February and figure demand for crude will reach record highs this year and next.

In a report published Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) forecast that the world would consume 100.8 million barrels of oil a day this year, up 4.2 million barrels a day from 2021.

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Inputs from WSJ

Picture Credits: Reuters