Oil jumps to new 7-year high after OPEC+ agrees to output hike

Oil in New York neared $90 a barrel as OPEC+ agreed to another modest hike in output, allaying fears of a bigger rise in supply from the group.

West Texas Intermediate was at the highest level since 2014, after rallying 17 per cent in January. Global benchmark Brent traded near $89 a barrel, with prices steeply backwardated in a reflection of market tightness.

On paper, the Organisation of Petroleum Exporting Countries will lift output by 400,000 barrels a day in March, maintaining the 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, helping to strengthen a robust oil market.

“That is what was expected, despite some rumours yesterday that OPEC+ might agree on a larger hike,” said Carsten Fritsch, an analyst at Commerzbank AG. “They keep their powder dry for the time being.”

Crude has roared higher in 2022 after jumping 55 per cent 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 neighbour, have also boosted prices in recent weeks. Moscow says it has no plan to send in troops.

Crude remains in backwardation, 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.

The industry-funded American Petroleum Institute reported on Tuesday US oil inventories fell by 1.65 million barrels last week, according to people familiar with the figures. The data also showed a draw at the key Cushing storage hub. A drop, if confirmed by government numbers, would be a surprise: a Bloomberg survey of analysts shows a build of 1.8 million barrels.