Oil hits 7-year high as Houthi attack on UAE ratchets up regional tensions

Brent tests $88-mark on possible supply issues

The United Arab Emirates has vowed to retaliate against Houthi militants for a deadly attack on its capital Abu Dhabi on Monday that killed three people, as fresh tensions in the region helped push oil prices to their highest level in seven years.

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 $1.02, or 1.2%, to $87.50 a barrel by 0924 GMT, while US West Texas Intermediate (WTI) crude futures jumped $1.36, or 1.6%, to $85.18 a barrel.

Both benchmarks touched their highest levels since October 2014 on Tuesday. Supply concerns have risen this week after Yemen's Houthi group attacked the UAE, 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.

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. Goldman Sachs expects oil prices hitting $100 per barrel in the second half of this year, citing a lower than expected hit to demand from the Omicron coronavirus variant coupled with increased supply disruptions and OPEC+ shortfalls.

"This has kept the global oil market in a larger deficit than even our above consensus forecast," Goldman said in a note. Goldman sees Brent prices at $90 per barrel in the first quarter of 2022, $95 in the second quarter and $100 per barrel in the last two quarters.
 

11 killed by coalition air strikes in Yemen
 
Eleven people were killed in coalition air strikes on Yemen's rebel-held capital Sanaa, a witness and medical sources told AFP Tuesday, after the insurgents launched a rare and deadly attack on the United Arab Emirates.
 
"Eleven people were killed. The search is still going on for survivors in the rubble," said Akram al-Ahdal, a relative of some of the victims. A medical source confirmed the number of deaths.
 
The air strikes hit two houses, leaving them in ruins, Ahdal said. The UAE is part of the Saudi-led pro-government coalition fighting rebel forces. (Agencies)