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UPDATE 11-Oil surges to five-month highs on Ukraine tension
March 3, 2014 / 2:56 AM / 4 years ago

UPDATE 11-Oil surges to five-month highs on Ukraine tension

* Russia strengthens control over Crimea, calls U.N. meeting
    * Investors sell risky assets, buy oil
    * U.S. manufacturing growth rebounds from 8-month low

 (Updates with settlement prices, analysts commentary)
    By Elizabeth Dilts
    NEW YORK, March 3 (Reuters) - Crude prices rose more than $2
a barrel on Monday to the highest level since September as
tensions over Russian military intervention on the Crimean
peninsula rattled oil markets.
    President Vladimir Putin's forces tightened their grip on
the Crimea region of Ukraine on Monday. Ukraine said Russia was 
massing armored vehicles there after Putin declared over the
weekend that he had the right to invade his neighbor to protect
Russian interests and citizens.
    Ukraine said Russia deployed 16,000 new troops to Crimea
since last week. 
    Russia is one of the world's biggest oil producers, and
while analysts said it was unlikely Russian oil supplies would
be disrupted by the Ukraine crisis, investors dumped riskier
assets like stocks in favor of commodities like gold and oil.
    The growing tensions sparked a stock plunge in Moscow. The
Moscow bourse slumped 11 percent and wiped out nearly $60
billion of value off Russian companies.
    U.S. crude settled $2.33 higher at $104.92 a barrel,
its highest settlement price in 5-1/2 months. Earlier in the
session, U.S. oil climbed as high as $105.22 a barrel.  
    Brent crude settled $2.13 higher at $111.20 per
barrel, after earlier spiking $3.32 to $112.39 per barrel, its
highest intra-session peak since Dec. 30. 
    The rise in U.S. oil lifted oil products. New York ultra-low
sulfur diesel, commonly known as heating oil, rose more
than 6 cents to settle at $3.0805. U.S. gasoline RBOB 
rose more than 4 cents to settle at $3.0203 per gallon. 
    "There was a risk-off trade across markets except for
commodities like oil where there is the biggest potential to see
a  supply crunch," Matt Smith, analyst at energy-consulting firm
Schneider Electric. 
    Former Ukrainian president Viktor Yanukovich, a Russian
ally, fled the country on Feb. 21 after three months of street
protests against his rule. 
    Ukraine began mobilizing troops in the region over the
weekend, alleging Russia's military intervention constituted a
"declaration of war."  
    Russian naval officials dispelled a report on Monday from
the news agency Interfax that said Russian naval officials had
ordered Ukrainian troops in Crimea to surrender by Tuesday or
face a military assault, calling it "complete nonsense." The
market briefly rose on the news. 
    A leader in the Russian Parliament said on Monday that "for
now, there is no need" to send armed Russian forces into
    Brent gained additional momentum on Monday after it pushed
higher past a key technical point at $111.85 a barrel. That
price marked a 61.8 percent Fibonacci retracement of a previous
price fall. 
   U.S. factory activity rebounded from an eight-month low in
February and consumer spending rose more than expected in
January, supporting U.S. oil. 
    A stronger U.S. dollar capped gains in U.S. oil and
commodities priced in the dollar. 
    Russia produces about 10.4 million barrels of oil per day,
and exports about 5.5 million barrels of crude oil per day.
Piped gas exports beyond the former Soviet Union totalled 15.8
billion cubic meters in January, U.S. government data showed.
    The stand-off in Crimea raised concerns over disruptions of
Russian natural gas supplies to Europe, which would lead to a
rise in demand for alternative fuels such as heating oil. The
European Union gets roughly a quarter of its gas supply from
Russia, about half of which is piped through Ukraine.
    A relatively mild winter in Europe has reduced demand for
heating fuel, however, and stockpiles stand about 20 percent
above last year's level at the main European gas hubs.

 (Additional reporting by Christopher Johnson in London and
Jacob Gronholt-Pedersen in Singapore; Editing by Dale Hudson,
Jason Neely and Sofina Mirza-Reid and Diane Craft)

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