Oil rises above $110 on mount­ing Ukraine ten­sion

Daily Trust - - REUTERS -

Global oil prices rose above $110 a bar­rel on Wed­nes­day, shak­ing off slower eco­nomic growth in China, as ten­sions mounted in Ukraine.

Ukrainian govern­ment forces and sep­a­ratist pro-Rus­sian mili­tia staged ri­val shows of force in east­ern Ukraine amid es­ca­lat­ing rhetoric on the eve of cru­cial four-power talks on the for­mer Soviet state’s fu­ture.

Brent crude for June de­liv­ery re­versed early losses to rise by a dol­lar and was trad­ing up 75 cents at $110.11 by 1418 GMT, its high­est since March 4. The May con­tract ex­pired on Tues­day. U.S. crude for May de­liv­ery rose more than $1 and was trad­ing up 80 cents at $104.55 a bar­rel.

Brent’s pre­mium to U.S. West Texas Intermediate CL-LCO1=R crude nar­rowed on Wed­nes­day but re­mains at its widest in two weeks, lifted by oil­field main­te­nance that has curbed sup­plies of North Sea crude grades as well as geopo­lit­i­cal risks.

“It is main­te­nance sea­son in the North Sea. Load­ing for the four grades that make up the bench­mark are down for May and this also drives up Brent,” Harry Tchilin­guirian, head of com­mod­ity mar­kets strat­egy at BNP Paribas, said.

“The sit­u­a­tion in east­ern Ukraine has de­te­ri­o­rated in the past cou­ple of days but ... no one is pric­ing in eco­nomic sanc­tions due to Rus­sia’s in­ter­de­pen­dence with Euro­pean en­ergy needs.”

On Tues­day, the Euro­pean Union scram­bled for so­lu­tions to ease its de­pen­dence on Rus­sian gas and help sup­ply Ukraine. Rus­sia sup­plies 30 per­cent of Europe’s gas needs.

Grow­ing scep­ti­cism that Libyan ex­ports can re­sume quickly or sus­tain­ably has also sup­ported Brent.

A tanker started load­ing at Libya’s east­ern port of Hariga on Wed­nes­day for the first time in nearly nine months, af­ter a fed­er­al­ist group agreed to re­open the port last week.

But the larger ter­mi­nals of Ras Lanuf and Es Sider re­main in rebel hands and their fate is sub­ject to fur­ther ne­go­ti­a­tions with the govern­ment of the OPEC ex­porter.

Fresh ev­i­dence of slow­ing eco­nomic growth in China, the world’s sec­ond-largest econ­omy and oil con­sumer, had put pres­sure on oil prices early in the day though the fig­ures were stronger than many had ex­pected.

China said its gross do­mes­tic prod­uct grew by 7.4 per­cent in the first quar­ter, the slow­est pace in 18 months but slightly ahead of mar­ket fore­casts of a 7.3 per­cent rise.

“It’s not nec­es­sar­ily a neg­a­tive for oil but it’s not pro­vid­ing the sup­port that was an­tic­i­pated,” Michael McCarthy, chief strate­gist at CMC Mar­kets in Syd­ney, said.

A slow­ing econ­omy damp­ened en­ergy use in China as its im­plied oil de­mand fell 0.6 per­cent to 9.96 mil­lion bar­rels per day in the first quar­ter, forc­ing re­fin­ers to scale back crude runs and raise ex­ports to trim high fuel stocks. In­vestors were also await­ing weekly oil in­ven­tory data from the U.S. Depart­ment of En­ergy’s En­ergy In­for­ma­tion Ad­min­is­tra­tion due on Wed­nes­day. Data from in­dus­try group Amer­i­can Petroleum In­sti­tute on Tues­day showed that U.S. crude in­ven­to­ries rose 7.6 mil­lion bar­rels in the week to April 11, com­pared with an­a­lysts’ ex­pec­ta­tions for an in­crease of 2.3 mil­lion.

If Wed­nes­day’s num­bers sup­port the un­ex­pect­edly large build shown in the API data, U.S. crude would likely give up gains, par­tic­u­larly as it faces a tech­ni­cal bar­rier at around $105 a bar­rel, Tchilin­guirian said.

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