Crude up $1/bbl on rising Middle East tensions after attack on UAE

SINGAPORE (ICIS)–Benchmark crude prices rose more than $1/bbl on Tuesday following an attack on a Abu Dhabi National Oil Company (ADNOC) fuel depot in the UAE, fuelling concerns of an escalation of tensions in the Middle East which could impact supply conditions.

Product	Latest	Previous	Change
Brent March	87.20	86.48	0.72
WTI February	84.87	83.82	1.05

At 03:49 GMT on Tuesday, Brent crude was 72 cents higher at $87.20/bbl. Brent futures earlier reached a session high of $87.55/bbl, up $1.07/bbl, their highest since 29 October 2014.

US WTI rose by $1.05/bbl to $84.87/bbl after earlier reaching a session high of $85.19/bbl, a $1.37/bbl increase from the previous settlement price of $83.82 on 14 January.

Trade was subdued in the US due to the Martin Luther King holiday.

UAE state-owned oil firm ADNOC in a Twitter post on Tuesday said that it has activated business continuity plans to ensure continued supply of products to its local and international customers following an incident on its Mussafah fuel depot.

The company said in an earlier statement that the incident at the fuel depot occurred at around 10:00 hours (06:00 GMT) on 17 January.

The incident resulted in the outbreak of a fire and three workers were killed as a result, it said.

“We are working closely with the relevant authorities to determine the exact cause and a detailed investigation has commenced,” ADNOC said.

Yemen’s Houthi rebels have claimed responsibility for the attack, which involved ballistic missiles and deployed armed drones, according to local media reports.

The attack also resulted in a fire at Abu Dhabi’s main international airport, they said.

“We condemn the Houthi militia’s targeting of civilian areas and facilities on UAE soil today,” the UAE’s Ministry of Foreign Affairs and International Cooperation said in a statement.

The UAE reserves the right to respond to “terrorist attacks and criminal escalation”, the ministry said.

The Saudi Arabia-led coalition on Monday said it has launched air strikes aimed at Yemen’s Houti-held capital Sanaa following the attack in Abu Dhabi.

“In response to the threat and [out of] military necessity, air strikes have begun in Sanaa,” the official Saudi Press Agency said in a post on Twitter late on Monday.

News of the attack in Abu Dhabi comes at a time when there is already plenty of concern in the oil market over the potential impact of an escalation in tensions between Russia and Ukraine, said Dutch banking and financial services firm ING in a note.

“These growing risks, combined with worries over OPEC spare capacity, have meant that sentiment in the oil market has remained bullish,” it said.

“Technically, the oil market is well in overbought territory, whilst fundamentally we also believe that the market is being too complacent about demand risks around China and its zero-Covid policy,” ING added.

Focus article by Nurluqman Suratman