Oil prices rise to seven-year highs

UAE fuel storage facility attack and Russia-Ukraine tensions drive prices higher

Oil prices rose to their highest level in seven years on Wednesday, as demand continued to outstrip global supply.

OPEC predicts continuing demand

On Tuesday, the Organisation of the Petroleum Exporting Countries (OPEC) maintained its forecast for strong growth in global oil demand throughout 2022.

Publishing its monthly report, OPEC stated: “While the new Omicron variant may have an impact in 1H22, which is dependent on any further lockdown measures and rising hospitalisations levels impacting the workforce, projections for economic growth remain robust.”

The report added: “Monetary actions are not expected to hinder underlying global economic growth momentum, but rather serve to recalibrate otherwise overheating economies… The oil market is expected to remain well-supported throughout 2022.”

Earlier in the month, the consortium announced its intention to increase production targets by another 400,000 barrels per day (bpd) in February. 

Global tensions

The general upward trend of oil prices was given more immediate momentum by Monday’s drone attack on a fuel storage facility in the United Arab Emirates. The attack, which killed three people near Abu Dhabi airport, is thought to have been carried out by Yemeni Houthi rebels. 

A retaliatory Saudi-led coalition airstrike on Yemen’s capital of Sanaa is thought to have resulted in the deaths of almost 20 people.

Such geopolitical uncertainty in the oil-rich region affected investor sentiment, sending prices higher. 

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This trend continued on Wednesday as relations between Russia and leading Western nations worsened. Visiting Ukraine, US Secretary of State Andrew Blinken condemned what he described as the “unprovoked” build-up of Russian troops on the Ukrainian border. 

Imminent joint military exercises between Russia and Belarus have further increased fears of an invasion. 

Blinken’s opposite number, Russian Foreign Minister Sergey Lavrov, dismissed US claims about a potential Russian invasion of Ukraine as “total disinformation”. 

The two officials are expected to meet in Geneva towards the end of the week.

By 13:45 GMT/UST, Brent crude futures traded up by 0.6% at $88.04 per barrel, having briefly risen as high as $88.96 per barrel. 

West Texas Intermediate crude futures stood 0.6% higher after rising as high as $86.40 per barrel.

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