International Oil Prices Reach Highest Level in 7 Years Amid Rising Middle East Geopolitical Tensions

Yemen-UAE Armed Conflict Pushes WTI to $85.43... Goldman Sachs Predicts Brent Oil at $100

[Asia Economy Reporter Park Byung-hee] As geopolitical tensions in the Middle East have newly escalated, international oil prices have soared to their highest level in seven years.

On the 18th (local time) at the New York Mercantile Exchange, the price of West Texas Intermediate (WTI) crude oil futures closed at $85.43 per barrel, up $1.61 (1.9%) from the previous trading day, marking the highest level since October 2014. Brent crude oil futures also rose by $1.03 (1.2%) to $87.51 per barrel.

Concerns over disruptions in Middle Eastern oil supply increased after it was confirmed that Yemen's Houthi rebels attacked oil facilities in the United Arab Emirates (UAE) with drones on the 17th. Shortly after several explosions at the UAE oil facilities, the Houthi rebels claimed responsibility. The UAE and Saudi Arabia immediately launched large-scale airstrikes on the Yemeni capital, Sana'a. CNN reported that this was the largest airstrike on Sana'a since 2019, with at least 12 people killed.

The Houthi rebels stated that more attacks could follow, and the UAE warned it would exercise its right to respond to the terrorist attacks. The Houthi rebels receive support from Iran. Meanwhile, the UAE has been involved in the Yemeni civil war since 2015 as part of the Sunni coalition of nine countries led by Saudi Arabia. This has raised concerns about a renewed conflict between Saudi Arabia and Iran, the leaders of the Sunni and Shia factions in the Middle East. Iran has not yet officially commented on the recent clashes between Yemen and the UAE.

CNN noted that it has not been confirmed whether Iran was behind the Houthi rebels' attack, but warned that this conflict could derail the Iran nuclear negotiations.

Louis Dickson, Senior Analyst at Rystad Energy, explained, "The damage to Abu Dhabi's oil facilities itself is not significant, but this incident could raise concerns about disruptions to the expansion of Middle Eastern oil supply this year." He added, "If geopolitical tensions in the Middle East escalate, the Iran nuclear deal could fail, which means Iranian oil would be excluded from the market."

The ongoing conflict between the West and Russia over Ukraine and forecasts that the Omicron variant will not significantly impact oil demand also contributed to the rise in oil prices. The Organization of the Petroleum Exporting Countries (OPEC) projected in a report released that global oil consumption this year will reach 100.8 million barrels per day, an increase of 4.2 million barrels from last year.

Goldman Sachs predicted that OECD oil inventories will fall to their lowest level since 2000 by this summer, and Brent crude prices could rise to $100 per barrel in the second half of this year.

On this day, backwardation appeared in the oil market, where spot prices exceeded futures prices, increasing the possibility of further oil price rises. Futures prices also significantly exceeded the prices of nearby contracts. The Wall Street Journal (WSJ) explained that next month's crude oil futures prices were $9.75 per barrel higher than those for delivery one year later, marking the highest premium for next month's delivery in the past decade.

This content was produced with the assistance of AI translation services.