Brent steady above $107 as investors eye Ukraine tension

Mon Jul 21, 2014 12:23am EDT

Related Topics

* U.S. blames Russia for complicity in shooting down flight MH17

* New European sanctions on Russia may heighten oil risk premium

* Iran faces pressure as nuclear deal lapses

By Jacob Gronholt-Pedersen

SINGAPORE, July 21 (Reuters) - Brent crude held steady above $107 a barrel on Monday with investors closely watching an intensifying geopolitical crisis between Moscow and the West over the downing of a civilian jet in Ukraine last week.

Still, investors seemed reluctant to build higher risk premium into oil prices, with the risk of supply disruptions from Russia looking limited for the time being.

U.S. Secretary of State John Kerry laid out on Sunday what he called overwhelming evidence of Russian complicity in the shooting down of Malaysia Airlines flight MH17.

President Vladimir Putin, however, has so far appeared unconcerned about the increasing international pressure that could lead to further sanctions against the world's top oil producer.

"There is a fair way to go before the situation turns into something that poses a more clear danger to disruption on oil and gas supplies from Russia," said Ric Spooner, chief markets analyst at CMC Markets in Sydney.

Brent crude for September deliver was up 4 cents at $107.28 a barrel at 0405 GMT, while U.S. oil for August delivery was down 11 cents to $103.02 a barrel.

The U.S. front-month contract expires on Tuesday.

"It seems likely we will see increased sanctions [on Russia]from Europe, but depending on the nature of those and given no further incidents, the chances are that the risk premium will tend to unwind in the coming weeks," Spooner said.

IRAN PRESSURE

Fresh U.S. sanctions on Russia last week, followed by the downing of the Malaysia Airlines plane over Ukraine, revived geopolitical concerns last week and pumped up global crude oil prices.

But reduced worries over Iraqi oil supplies and weak physical demand from European and Asian refiners struggling with low processing profits have contributed to a more than 7 percent drop in oil prices since a peak above $115 a barrel last month.

Potentially supporting oil prices, Iran is facing new Western pressure to make concessions over its atomic activities after it and six world powers failed to meet a July 20 deadline for a deal to end a decade-old dispute.

But Iran has also moved to eliminate its most sensitive stockpile of enriched uranium gas under an interim nuclear deal reached last year, according to a monthly update by the U.N. nuclear watchdog obtained by Reuters on Sunday.

In other signs of heightened tensions in the Middle East, Israeli tanks shelled militant targets in the Gaza Strip on Monday and a woman died in an air strike after the bloodiest day for both sides of a nearly two-week military offensive.

Israel and the Gaza Strip have no oil production, but investors often worry that any conflict between the two could spread or escalate to involve key producers.

(Reporting By Jacob Gronholt-Pedersen; Editing by Tom Hogue)

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