* Kiev resumes operations in Eastern Ukraine with fatalities
* Putin warns of 'consequences' of Ukrainian army actions
* Strong U.S. durable good orders point to higher demand
* Supply cuts in North Sea, Libya disruption supports Brent
(Adds settlement prices)
By Sabina Zawadzki
NEW YORK, April 24 Brent crude futures rose by
more than a dollar a barrel on Thursday as mutual accusations of
aggression by Ukraine and Russia raised concerns over future oil
supplies, while strong U.S. economic data suggested higher
Ukraine resumed its operation to disarm pro-Moscow
separatists in the east of the country and retake their
positions, killing five and prompting Russia to launch fresh
military drills close to the Ukrainian border.
Russian President Vladimir Putin warned of "consequences" if
Kiev used the army against its own people. His Ukrainian
counterpart demanded Russia end its "threats and blackmail" and
pull back troops from the border.
Having already risen a dollar a barrel, Brent jumped a
further 30 cents after Ukraine gave Russia 48 hours to give it
an explanation of its military exercises by the border.
Global benchmark Brent crude settled $1.22 a barrel
higher at $110.33 while U.S. crude settled 50 cents
higher at $101.94.
The Brent-WTI spread CL-LCO1=R ballooned by as much as
$8.58 with Brent's rise, the widest since March 17 and bypassing
its 200-day moving average of $8.20.
"Between the rhetoric flying round amongst the various
bodies - the Russians, the president of the United States, the
Ukrainians themselves - it's just gotten heated up," said John
Kilduff, partner at Again Capital LLC.
"It's not calming down, it's getting worse and we continue
to see oil very reactive to that," he said, adding that once
Brent had broken through the $110 technical level earlier in the
day, it may rise "a few more dollars on top of that".
A cut in Russian supplies of gas to Ukraine would increase
demand on oil products as replacement fuels. In addition, any
further Western sanctions against Russia could cause disruptions
in supplies from the world's second largest oil exporter.
U.S. President Barack Obama said more sanctions were "teed
up" against Russia if it fails to deliver on promises made in an
agreement in Geneva last week to ease tensions in Ukraine.
Supply cuts in the North Sea and Libya also supported Brent.
Rebels in eastern Libya said two terminals would remain
closed as the government had not implemented its part of a
recent deal to end an oil blockade.
Supply at the North Sea Buzzard oilfield, the biggest
contributor to Forties, was cut by a quarter, a trade source
said. Forties is one of four crude streams underpinning Brent.
Strong economic data in the United States lent additional
support to the U.S. oil prices, which have been otherwise
weighed down by strong supplies as crude oil inventories rose to
their highest levels on record last week.
Government data showed orders for long-lasting manufactured
goods rose more than expected by 2.6 percent in March in the
latest of industrial, retail and employment reports suggesting
the economy has gained steam after a troubled first quarter.
U.S crude oil stockpiles rose to 397 million barrels last
week, according to Department of Energy data issued on
Wednesday, the highest level since record-keeping began in 1982.
"The immediate demand-supply dynamic is negative, but
Ukraine is the wild card that is stopping the market from
declining further," said Ric Spooner, chief analyst at CMC
Markets. "For the near term, I see markets largely neutral,
trading in a range with a downward bias."
(Additional reporting by Alex Lawler In London and Manash
Goswami in Singapore; Editing by Dale Hudson, David Evans, Tom
Brown, Meredith Mazzilli and Diane Craft)