Brent rises, hovers near $108 as Ukraine crisis worsens

Mon Apr 14, 2014 10:21am IST

* Pro-Russia militants seize more ground in east Ukraine, risk of "gas war" looms

* More U.S. sanctions likely if Russian actions in Ukraine continue

By Keith Wallis

SINGAPORE April 14 (Reuters) - Brent futures rose and hovered near $108 a barrel on Monday amid worsening geopolitical tensions over Ukraine that has raised the risk of a military confrontation between Ukraine and Russia.

Ukraine has given pro-Russian separatists a Monday morning deadline to disarm or face a "full-scale anti-terrorist operation" by its armed forces, while the United States and the European Union mull tougher sanctions against Russia if separatist action continues.

Brent crude rose 60 cents to $107.93 by 0358 GMT, after gaining 0.6 percent last week. It hit an intra-day high of $108.04. U.S. oil climbed 53 cents to $104.27 after settling 34 cents up in the previous session.

"I don't think they (Russia) will adhere to the deadline. Ukraine doesn't have much bargaining power," said Tan Chee Tat, investment analyst at Singapore's Phillip Futures.

Yet, the political crisis is unlikely to have a direct impact on global oil supplies, which is why "Brent is likely to trade range bound with a slight upside", Tan said.

Russia has amassed 35,000-40,000 troops near the Ukrainian border in addition to the 25,000 troops it recently moved into Crimea, Lyall Grant, Britain's U.N. ambassador said.

As the crisis worsens, the United States may step up sanctions, likely targeting Russians close to Putin as well as Russian entities. However, they will not necessarily target entire Russian business sectors such as mining, banking and energy. Separately, European Union foreign ministers will meet on Monday to discuss how to toughen sanctions against Russia.

The tensions overshadowed expectations of more Libyan crude coming into the market and potentially weighing on Brent prices amid a weak demand outlook from top consumer China.

Libya's western Zawiya oil port has resumed operations after protesters vacated the entrance to the facilities and the adjoining refinery will restart in about 24 hours, a spokesman for the state oil company said.

The National Oil Corp spokesman added that there were continuing issues with protesters in the area but they hoped to resolve these in the next few hours.

Further gains in prices are also limited as investors await fresh data from the world's second-biggest consumer China. A Reuters poll showed growth slowed to 7.3 percent in the first quarter from 7.7 percent in the final three months of 2013. This would be the slowest pace of growth in five years and near the minimum level needed to ensure stable employment. (Editing by Muralikumar Anantharaman)

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