Brent climbs above $106 on Ukraine tension; Libya supply caps gains

Tue Apr 8, 2014 12:02am EDT

Related Topics

* Oil workers in Libya preparing to load crude onto tankers

* With tumbling equities, some investors flee to energy markets

* Oil supported by increased tension in Ukraine

By Jacob Gronholt-Pedersen

SINGAPORE, April 8 (Reuters) - Brent crude climbed above $106 a barrel on Tuesday supported by increased tensions between Russia and the West over Ukraine, while gains were capped by news that Libya prepared to load crude onto tankers from newly reopened ports.

Oil prices were supported by renewed tensions in Ukraine, which raised concerns about the possibility of a deeper diplomatic rift between Russia, the world's biggest oil producer, and the West.

Brent crude for May delivery was up 27 cents to $106.09 a barrel at 0351 GMT after settling down 90 cents. U.S. crude for May gained 49 cents to $100.93 a barrel after it settled 70 cents lower.

The rise in oil prices also came amid a broad retreat in global equity markets and a weakening of the dollar.

"One of the reasons we are seeing support for Brent is that investors are returning to the basics and the very clear underlying upward trend we have in global growth. Here, energy is one of the prime candidates," said Michael McCarthy, chief strategist at CMC Markets in Sydney.

The Nasdaq Composite on Monday saw its worst three-session decline since November 2011, while the S&P 500's three-day fall was its steepest since late January.

"Share markets have been running well ahead of earnings, in many cases at record highs, and that's getting a lot of investors nervous," McCarthy said.

Gains were checked by the prospect of additional Libyan supplies after rebels agreed to gradually end their eight-month blockade of key oil ports accounting for around 700,000 barrels per day (bpd) that had curbed exports from the OPEC member.

At Libya's 70,000 bpd Zueitina oil port located 100 km west of Benghazi, maintenance personnel, some of them foreign workers, in red jump suits and helmets were on Monday busy preparing to load crude into tankers .

"We are talking potentially one percent of daily global supply (from Libya). While that's not insignificant, that's not a game changer either," said McCarthy.

In eastern Ukraine, pro-Moscow protesters seized arms in one city and declared a separatist republic in another, in moves Kiev described as part of a Russian-orchestrated plan to justify an invasion to dismember the country.

Kiev said the overnight seizure of public buildings in three cities in eastern Ukraine's mainly Russian-speaking industrial heartland was a replay of events in Crimea, the Black Sea peninsula Moscow seized and annexed last month.

IRAN TALKS

The rise in oil prices was also capped by hopes over easing tension between Iran and the west as the OPEC member said it hopes enough progress will be made this week to enable negotiators to start drafting by mid-May a final accord to settle a long-running dispute over its nuclear programme.

The Islamic Republic and six world powers will hold a new round of talks in Vienna on Tuesday and Wednesday intended to reach a comprehensive agreement by July 20 on how to resolve a decade-old standoff.

U.S. commercial crude oil stockpiles were expected to have risen last week, while inventories of refined oil products likely slipped, a preliminary Reuters poll of four analysts showed on Monday.

The survey, taken ahead of weekly inventory reports from industry group the American Petroleum Institute (API) and from the U.S. Department of Energy's Energy Information Administration (EIA), showed crude stocks rising 1.9 million barrels on average for the week ending April 4. (Reporting by Jacob Gronholt-Pedersen; Editing by Sunil Nair)

FILED UNDER: