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article imageOil market rises on resurgent Ukraine tensions

By AFP     Apr 8, 2014 in Business

Global oil prices advanced on Tuesday on renewed Ukraine tensions after pro-Russian protesters seized government buildings in the eastern city of Donetsk.

New York's West Texas Intermediate (WTI) for delivery in May won 77 cents to $101.21 per barrel.

Brent North Sea crude for May gained 50 cents to $106.32 a barrel in late morning trade in London.

NATO's chief on Tuesday warned Russia against further intervention in Ukraine, urging Moscow to "step back" after pro-Kremlin militants seized government buildings in several cities in the east.

"Unsettling news continues to come out of east Ukraine, where pro-Russian separatists are becoming increasingly forthright in their demands for a split from Ukraine and an accession to Russia," said Commerzbank analyst Carsten Fritsch.

"Ukraine accuses Russia of fuelling these tensions. Any further escalation of the situation would intensify tensions between Russia and the West and could lead to tighter sanctions being imposed on Russia.

"So far, the market appears to believe this to be unlikely, though that means the (oil) price would react all the more strongly if sanctions actually were imposed on the Russian oil and gas sector."

Pro-Russia activists have seized state buildings in the eastern cities of Kharkiv, Lugansk and Donetsk, where they have vowed to vote on joining Russia in an eerie echo of last month's situation in Crimea, a Black Sea peninsula that has since been annexed by Moscow.

Kiev has accused Russia of fomenting the unrest and Washington warned the Kremlin to stop efforts to "destabilise Ukraine," accusations that Moscow brushed off.

Russian troops remain massed on the border with Ukraine, exacerbating concerns about a possible military conflict.

With Ukraine being a key conduit for Russian gas to Europe traders fear that any disruption to supplies will send oil and gas prices skyrocketing.

Russian deliveries account for 34 percent of the natural gas supplies to the European Union, according to the Soufan Group, a US-based intelligence firm.

"The returning tensions in Ukraine are definitely providing some support to oil prices," added Desmond Chua, market analyst at CMC Markets in Singapore.

"Investors are watching closely for clues about Russia's intentions regarding Ukraine," he told AFP.

Singapore-based brokerage Phillip Futures said concerns over Ukraine ensured crude prices "stayed well supported at elevated levels despite fears over the influx of Libyan crude into global markets".

Rebels in Libya seeking regional autonomy agreed Sunday to allow the reopening of two of four oil terminals they have blockaded since July.

The deal allows for the immediate reopening of the Zueitina and Al-Hariga terminals, which have a combined oil export capacity of 210,000 barrels per day (bpd).

It also aims for a lifting of the blockade of Ras Lanouf and Al-Sidra ports, which together have a 550,000 bpd capacity, within two to four weeks.

Tripoli says the blockade since July has cost Libya more than $14 billion in lost revenues, slashing exports from 1.5 million to 250,000 bpd.

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