Crude oil futures are soaring Tuesday as geopolitical tensions supported energy commodities. The attack on an Abu Dhabi oil facility sent prices to their highest levels in about eight years, forcing some market analysts to revise their forecasts upward. So, where will crude prices trade moving forward?
March West Texas Intermediate (WTI) crude oil futures surged $1.52, or 1.81%, to $85.34 per barrel at 14:47 GMT on Tuesday on the New York Mercantile Exchange. Oil prices have been off to a hot started in 2022, rallying more than 13%. In the last week alone, US crude prices have advanced close to 9%.
Brent, the international benchmark for oil prices, flirted with $88. March Brent crude futures swelled $1.07, or 1.24%, to $87.55 a barrel on London’s ICE Futures exchange. Brent prices have also risen nearly 13% this year.
On Monday, Houthi rebels from Yemen, supported by the Iranian regime, claimed responsibility for an attack on an oil facility in Abu Dhabi that killed three people and triggered a fire at the United Arab Emirates’ international airport.
Market analysts warn that instability in the region could initiate supply shortages, especially since the UAE is the world’s eighth-largest oil producer.
“The damage to the UAE oil facilities in Abu Dhabi is not significant in itself, but it raises the question of even more supply disruptions in the region in 2022,” said Louise Dickson, senior oil markets analyst at Rystad Energy, in a research note. “The attack raises the geopolitical risk in the region and may signal the Iran-U.S. nuclear deal is off the table for the foreseeable future. That would mean Iranian oil barrels are off the market, boosting demand for similar grade crude originating elsewhere.”
Meanwhile, some Wall Street titans have increased their price targets for oil.
Goldman Sachs anticipates that oil prices will be higher in 2022 and 20223. According to the financial institution, analysts see Brent crude prices heading toward $96 per barrel this year and $105 a barrel in 2023.
“Robust fundamentals have reversed last year’s oil price meltdown, with the market remaining in a surprisingly large deficit as the Omicron demand hit is so far smaller (and likely briefer) than that of Delta exc. China,” said a team of commodity analysts, led by Damien Courvalin, in a note.
Moreover, Organisation for Economic Co-operation and Development (OECD) countries are expected to see their crude inventories falling to their lowest levels since the year 2000, plus spare capacity among nations in the Organization of the Petroleum Exporting Countries (OPEC) is projected to fall.
In other energy markets, March natural gas futures rose $0.018, or 0.44%, to $4.099 per British thermal units (btu). March gasoline futures jumped $0.0273, or 1.06%, to $2.4446 per gallon. March heating oil futures dropped $0.0083, or 0.32%, to $2.6251 a gallon.