Sonali Paul

MELBOURNE, Reuters – On Tuesday oil prices rose to a seven-year-high due to concerns about supply disruptions. The attack by Yemen’s Houthi terrorist group on the United Arab Emirates escalated hostilities between an Iran-aligned coalition and a Saudi Arabian led alliance.

In a note, an analyst at ANZ Research stated that the “new geopolitical tension” was adding to market tightness.

Futures rose 44 cents or 0.5% to $86.92 per barrel at 0230 GMT. They had previously hit a record of $87.00 on Oct. 30, 2014, and were at their highest point since October 30 2014.

U.S. West Texas Intermediate crude oil futures rose 81cs or 1% from Friday’s settlement, to $84.62 per barrel. This is just a two-month low of $84.78 that was reached earlier. Because Monday was an American public holiday, trade was quiet on Monday.

Houthi militants launched drone and missile strikes that set off fuel truck explosions and killed three people. However, it warned of more targets and the UAE stated it had the rights to “respond” to terrorist attacks.

ADNOC UAE Oil Company stated it had initiated business continuity plans to guarantee uninterrupted product supply for its international and local customers following the incident at Mussafah fuel depot.

Analysts at CommSec stated that oil prices are being supported by lower winter temperatures in northern hemisphere, which drove up heating fuel demand.

Analysts said the tight supply/demand balance won’t change, because some oil producers from the Organization of the Petroleum Exporting Countries struggle to pump at the permitted capacity. They are being held back by underinvestment, outages, and an agreement with Russia to provide 400,000 barrels per month.

Craig Erlam, OANDA analyst said that “that should continue to support oil and increase talk about triple-figure prices.”