(Bloomberg) -- Oil held near a fresh seven-year high as OPEC+ agreed to another modest increase in output while continuing tension along the Russia-Ukraine raised geopolitical concerns.
West Texas Intermediate edged higher, settling above $88 a barrel after touching a fresh high since 2014 earlier in the session. Crude's rally comes as heightened geopolitical risks are driven by fears that Russian forces may invade Ukraine, which could spark retaliatory sanctions by the U.S.
“The geopolitical risks are clearly rising,” said Natasha Kaneva, JPMorgan Chase Global Head of Commodities Research in a Bloomberg TV interview. If tensions continue to escalate, “oil can reach about $120 per barrel.”
Earlier Wednesday, the Organization of Petroleum Exporting Countries and its allies said it will lift output by 400,000 barrels a day in March, maintaining the modest pace of restoring supply shuttered at the height of the pandemic. Still, there's concern that some members of the alliance can't meet their production targets, adding to a sense of tightness in the oil market.
Read also: Russia Boosts Oil Output But Still Can't Meet OPEC+ Quota
Crude has roared higher in 2022 after jumping 55% last year. The surge has been driven by the steady global revival in demand, lower stockpiles and sporadic interruptions to supplies. Tensions over Ukraine, driven by concerns that Russia may invade its smaller neighbor, have also boosted prices in recent weeks. Moscow says it has no plan to send in troops.
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Crude remains backwardated, a bullish pattern marked by near-term prices commanding a premium over those further out. Swaps tied to the key North Sea oil market are pricing at their strongest level in years.
Further lending support to the bullish outlook, U.S. crude stockpiles fell 1.05 million barrels last week, according to information from the Energy Information Administration. Stockpiles at the nation's largest oil hub in Cushing, Oklahoma, fell 1.173 million barrels.
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