The United States and Europe are preparing new sanctions against
Russia as tensions escalated in eastern Ukraine. Pro-Russian rebels
paraded European monitors they are holding on Sunday, freeing one
but saying they had no plans to release another seven.
June Brent crude was at $109.78 a barrel, up 20 cents, by 0155 GMT
after settling down 75 cents on Friday.
U.S. crude for June delivery added 32 cents to $100.92 a barrel. On
Friday, the contract settled at its lowest level since April 7, due
to pressure from all-time high crude inventories recorded in the
week of April 18.
"If the conflict between the countries escalates, increased fuel
demand for military use and heightened risk of disruption will
likely continue to strengthen global oil prices," Barclays analysts
said in a note over the weekend.
Russia's oil pipeline monopoly Transneft said last week it was
worried Ukraine may take control of its oil product pipeline to
Russia is unlikely to use oil as a political weapon, but investors
remained cautious about the risks stemming from the east-west
crisis, said Yusuke Seta, a commodity sales manager at Newedge
In Libya, the government is assessing damage at the eastern oil port
of Zueitina following an eight-month oil blockade. Zueitina is one
of two ports which were due to re-open after the government struck a
deal with rebels three weeks ago.
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"They are unable to increase exports yet and hence it's a little bit
supportive for Brent," Newedge's Seta said.
U.S. crude narrowed the gap with Brent <CL-LCO1=R> slightly to $8.86
a barrel after it stretched as wide as $9.28 on Friday.
Analysts blamed record crude inventories in the United States for
depressing U.S. crude prices despite a rise in refinery utilisation
"The crude stocks in the U.S. have been mounting rapidly and only
that of PADD 2, including Cushing, has been decreasing," Seta said.
Crude inventories are unlikely to be drawn down quickly as U.S.
gasoline demand remained limited, he said.
"The flow from Cushing to the Gulf coast should stop at some point
and that means inventories at Cushing should increase again. This is
a bearish factor for WTI," Seta said.
(Reporting by Florence Tan; editing by Richard Pullin)
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