Oil prices surged yet again amid a spate of global tensions happening all over. As a result, the risk put a premium on crude oil prices, which rose to a new seven-year high.
Crude Oil Prices Rise Amid Global Tensions
Crude oil prices climbed to their highest levels since 2014 amid rising global tensions in the United Arab Emirates, Russia, and Turkey. Together, they spooked investors into clamoring for oil even as supplies continue to tighten.
Brent crude oil futures rose to $88.51 a barrel, which means an increase of $1.03 or 1.2%. Meanwhile, US West Texas Intermediate (WTI) crude oil futures ended up at $85.43.
This increase of $1.61 means prices rose 1.9% higher. Both Brent and WTI benchmarks hit their highest prices since October 2014. Consequently, some OPEC insiders say that a $100 per barrel price is not outside the realm of possibility.
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Houthi Group Attacks UAE Terminal
A Yemen-based group sympathetic to Iran launched missiles and drones into the United Arab Emirates. Local police reported that three people died and six received injuries when three fuel tankers exploded in the Mussafah area. The attack also caused a fire to break out near the Abu Dhabi airport.
This strike takes the war between the Iran-backed Houthi group and a Saudi-led coalition to a new level. It can also increase global tensions even as the United States and Iran are working on a nuclear deal.
The UAE Foreign Ministry issued a strong condemnation of the attack. It said that this “will not go unpunished. The UAE reserves the right to respond to these terrorist attacks and criminal escalation.”
Russia-Ukraine Tensions Continue To Escalate
Meanwhile, another OPEC ally is also handling a crisis at its border. Russia is currently crossing swords diplomatically with neighboring Ukraine.
Russian troops are now massing at the border shared with the former Soviet state. Observers describe the situation as very tense, with the White House saying that Russia can invade at any time now.
Separately, the US warned that Russian troops sent to Belarus for a supposed military exercise might be a red herring. Analysts think that Russia will deploy the troops to attack neighboring Ukraine instead.
As a result, US and German officials are now discussing ways to deter the apparent plans for invasion. This includes closing the Nord Stream 2 pipeline from Russia to central Europe.
Turkey Reports Explosion In Pipeline
In addition, Turkey just reported an explosion of yet undetermined origin at its pipeline. The country’s state pipeline operator said it just put out a blaze at its Kirkuk-Ceyhan pipeline.
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This network carries crude oil from Iraq, OPEC’s second-largest oil producer, to the Turkish port of Ceyhan.
The fire was a result of an earlier explosion that stopped the flow of oil. Operations will resume as soon as possible. As for the cause of the explosion, the state operator has yet to give an explanation.
Further Supply Disruptions Due To Global Tensions
Combined, the global tensions reported all across Eurasia and the Middle East are raising fears of further crude oil supply disruptions. OPEC, Russia, and its allies, collectively known as OPEC+, are already struggling to produce their target quotas.
Consequently, the commitment to add 400,000 barrels per day each month is becoming harder to fulfill. As a result, supplies are tighter than ever.
On a note, OANDA analyst Edward Moya predicts that oil will soon hit the century mark. “OPEC+ is falling short of hitting their production quotas,” he said. “If geopolitical tensions continue to heat up, Brent crude might not need much of a push to get to $100 a barrel.”
Watch the CNBC Television video reporting that energy stocks hold in the green as oil prices hit 7-year high:
Do you think oil prices will hit $100 per barrel this year? Do you think it’s likely to happen sooner than later? Let us know what you think. Share your thoughts below.