Brent Crude has now reached £64.24 ($87.5), a figure not seen since October 2014. Supply concerns were heightened this week after a drone attack by Yemen’s Houthi group near the UAE’s capital Abu Dhabi. The attack set off a number of fuel truck explosions, killing three people. The Houthi group has warned it may target more facilities while the UAE has said it reserved the right to “respond to these terrorist attacks” raising fears of escalating hostilities.
Abu Dhabi National Oil Company said it was “deeply saddened to confirm three colleagues have died”, adding that it had “activated the necessary business continuity plans to ensure the reliable, uninterrupted supply of products to its local and international customers.”
The attack comes at a time oil prices are already being pushed higher by underlying supply factors.
Nathan Piper, Head of Oil and Gas Research at Investec, explained while there were “always geopolitical events” there were key questions around how much capacity the Organisation of Petroleum Producing Countries (OPEC) has.
The group, which includes major oil exporters such as Saudi Arabia and Iran, has agreed to increase output by 400,000 barrels per day each month having previously cut output during the pandemic due to lower demand.
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Mr Piper told Express.co.uk: “What’s interesting is OPEC+ have missed the growing production quota for the last few months.
“More significantly Saudi Arabia has said they’re not going to make up for the shortfall of others, so we’ll produce our quota but we’re not going to overproduce to make up for other people who are a bit short.”
According to Mr Piper oil demand is now nearly back at pre-pandemic levels despite aviation still not returning to full capacity leaving serious questions over OPEC’s ability to keep up supply.
Across the countries underproducing Mr Piper pointed to underinvestment as well as a backlog of maintenance due to worker restrictions during lockdowns
He warned if OPEC wasn’t able to get back to full capacity it could prove a major problem with oil demand still expected to grow over the next 10 years despite the transition towards renewables.
In tandem with rising oil prices, petrol and diesel prices have reached record highs with the RAC currently putting average prices at 145.67p for petrol and 148.98p for diesel.
Analysts at Goldman Sachs today predicted oil prices could break the milestone of $100 (£73.42) per barrel this year.
The investment bank said it expected increases in OPEC+ production to fall even further short of quota in 2022 with oil inventories also expected to decline.
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While OPEC has been struggling to meet its output hike target, US President Joe Biden has been repeatedly calling for output to be increased even further.
So far the group has ignored the requests leading to Mr Biden releasing 50 million barrels from the US’s strategic reserves in a bid to bring down prices.
According to Reuters a similar release is now planned in co-ordination with China to fall near the Lunar New Year holidays which start on February 1st this year.
The quantities are not yet known but China is understood to be poised to release different amounts depending on the price of oil at the time.
The US’s previous release was noted by many analysts to have had little bearing on the price of oil which in the end was more influenced by demand concerns over the new Omicron variant in November.
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