* Brent on track for third weekly loss
* Heightened tension in Ukraine supports Brent
* Merkel warns of "catastrophe" ahead of Crimea referendum
to join Russia
By Jacob Gronholt-Pedersen
SINGAPORE, March 14 Brent crude held steady
above $107 a barrel on Friday, on track for a third weekly loss
amid worries over Chinese economic growth and rising U.S.
stockpiles, although heightened tension in Ukraine is causing
renewed worry over Russian oil supplies.
Russia launched new military exercises near its border with
Ukraine, showing no sign of backing down on plans to annex its
neighbour's Crimea region despite a stronger than expected drive
for sanctions from the EU and United States.
The conflict has provided support for global oil markets in
recent weeks as traders worry it could lead to a disruption of
oil supplies from Russia, the world's biggest oil producer.
"Rising tension in Ukraine is the most important event for
oil markets in the short term," said Michael McCarthy, chief
strategist at CMC Markets in Sydney.
Brent crude was up 1 cent at $107.40 a barrel at
0251 GMT after settling 63 cents lower on Thursday.
U.S. crude was trading 3 cents lower at $98.17 a
barrel, after closing 21 cents higher.
In an unusually robust and emotional speech in response to
the crisis and a referendum on Crimea joining Russia planned for
Sunday, German Chancellor Angela Merkel warned of "catastrophe"
unless Russia changes course.
"I see this as a binary risk, meaning it ends either all
good or all bad," said McCarthy. "A peaceful resolution would
remove some of the premium that Brent has over West Texas
Intermediate. But the short term direction is very hard to
Signs of slowing Chinese economic growth raised concerns
over oil demand in the world's second largest consumer of oil
this week. However, solid U.S. retail sales and labour market
data Thursday raised optimism about the economy, and also
reinforced expectations that the U.S. Federal Reserve will stick
to its plan of gradually withdrawing its asset-buying stimulus.
Still, U.S. crude has lost 4.3 percent for the week, its
steepest fall since early January, after the U.S. government
surprised markets on Wednesday by announcing a test release from
its strategic petroleum reserve.
The United States offered a modest 5 million barrels in what
some observers saw as a message from the Obama administration to
Russia, whose intervention in Ukraine may disrupt oil supplies
from the major producer.
A steep rise in U.S. oil stockpiles also weighed on the
contract, but it could find support from warnings that
stagnating production in North Dakota caused by severe winter
weather could extend into April.
Output from the booming Bakken and Three Forks shale region
fell by about 5,000 barrels-per-day (bpd) to around 935,000 bpd
in January, Department of Mineral Resources data showed. Output
in December had dropped by 55,000 bpd from the month before, the
biggest drop since the shale boom began.
Daily output from 12 of the main British and Norwegian crude
streams in the North Sea as tracked by Reuters is set to fall by
almost 2 percent in April from March. But traders said the fall
probably would not be enough to support prices as many
refineries will be under maintenance.
(Reporting By Jacob Gronholt-Pedersen; Editing by Richard