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Oil rises to more than 7 years high on Middle East tensions, tight supply

Oil pump forces are seen at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquen, Argentina, January 21, 2019. REUTERS / Agustin Marcarian / File Photo

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  • Brent, WTI jumps over $ 1 / barrel to the highest since October 2014
  • Tensions in the Middle East are raising concerns about supply shortages
  • Supply shortages could push prices to $ 100 analysts

SINGAPORE, January 18 (Reuters) - Oil prices rose more than $ 1 on Tuesday to the highest level in more than seven years due to concerns about possible supply disruptions, after Yemen's Houthi group attacked the United Arab Emirates and escalated hostilities between Iran already group and a Saudi-led coalition. Read more

The "new geopolitical tension adds to ongoing signs of tightness across the market," ANZ Research analyst said in a note.

Futures on Brent oil rose $ 1.37 or 1.6% to $ 87.85 per share. barrel at 0738 GMT, while US West Texas Intermediate (WTI) futures rose $ 1.71 or 2% from Friday's settlement to $ 85.53 per barrel. barrel. Trade on Monday was subdued as it was a US holiday.

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Both benchmarks climbed to their highest levels since October 2014 on Tuesday.

After launching drone and missile attacks that triggered explosions in fuel vehicles and killed three people, the Houthi movement warned it could target more facilities, while the UAE said it reserves the right to "respond to these terrorist attacks". Read more

The UAE oil company ADNOC said it had activated business continuity plans to ensure uninterrupted delivery of products to its local and international customers following an incident at the Mussafah fuel depot. Read more

CommSec analysts said oil prices were also supported by colder winter temperatures in the northern hemisphere, which increased demand for heating fuel.

"Analysis forecasts expect demand to exceed supply this year as the world opens up from 2-year lockdowns and resumes a more normal trajectory for demand," said Ash Glover at CMC Markets.

The tight balance between supply and demand is unlikely to ease, analysts said.

Some producers within the Organization of the Petroleum Exporting Countries (OPEC) are struggling to pump up their allowable capacity, due to underinvestment and outages, under an agreement with Russia and allies, known as OPEC +, to add 400,000 barrels a day every month.

"It should continue to be supportive of oil and increase talk of triple-digit prices," said OANDA analyst Craig Erlam.

"If current geopolitical tensions continue and OPEC + members are unable to deliver on their rise of 400,000 barrels a day, macros combined with strong technical prospects could see prices push against the $ 100 mark, which is where the next (meaningful) ) technical resistance level is. " said Glover.

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Reporting by Sonali Paul in Melbourne and Roslan Khasawneh in Singapore; Edited by Muralikumar Anantharaman, Jacqueline Wong and Kim Coghill

Our standards: Thomson Reuters Trust Principles.

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