WTI futures extend gains on Ukraine tension, Brent rises

Both West Texas Intermediate and Brent crude benchmarks rose on Monday as tensions escalated in east Ukraine, spurring fears of possible disruptions of energy exports to Europe. Limiting gains to some extent, operations at Libya’s Zawiya oil export terminal were resumed.

On the New York Mercantile Exchange, WTI crude for delivery in May traded at $104.28 per barrel at 9:00 GMT, up 0.52% on the day. Prices shifted in a daily range between day’s high and low of $104.55 and $103.41 per barrel. The US crude benchmark rose by 0.3% on Friday and settled the week 2.6% higher, its best weekly performance this year.

Meanwhile on the ICE, Brent futures for settlement in the same month jumped by 0.80% to $108.19 per barrel, having varied in a daily range between a four-week high of $108.38 and $107.35 per barrel. The contract slid 0.1% on Friday to $107.33 a barrel, trimming its weekly advance to 0.6%. Brent traded at a premium of $3.91 to its US counterpart, up from Friday’s settlement at $3.59 which was the narrowest since September 19th.

The oil market edged higher on Monday amid renewed tension between Ukraine and Russia, which threatened to cut energy supplies to Europe. Kiev gave pro-Russian separatists a deadline until Monday morning to yield or face an anti-terrorist operation by its armed forces, while the European Union and the United States work on tougher economic sanctions, if Russia continues its course.

According to Ukraine’s Interior Minister Arsen Avakov, camouflaged gunmen fired on government forces near Slovyansk. Meanwhile, Russia’s Ambassador to the United Nations Vitaly Churkin said before the U.N. Security Council that “henchmen” of Kiev’s pro-European government are organizing attacks, backed by its Western allies.

According to Lyall Grant, Britain’s U.N. ambassador, Russia has stationed around 40 000 troops near its border to Ukraine after another 25 000 were moved into the recently annexed Crimea region.

European Union Energy Commissioner Guenther Oettinger will hold talks regarding the threat of a gas war at a meeting of foreign ministers on Monday, while the United States is separately preparing to impose further sanctions on Putin’s close allies, as well as Russian entities, if Moscow continues its current course. President Vladimir Putin warned last week that Moscow can cut gas supplies to Ukraine, if it doesn’t pay its bill, thus leading to a reduction in supplies to Europe.

Libyan supply

Gains were limited to some extent by the prospects of rising Libyan exports. The state-run National Oil Corporation said that Libya’s western Zawiya oil port has resumed operations and the adjacent refinery will be reopened within 24 hours.

The state-run oil company lifted a force-majeure on exports from the Hariga port on April 10th, one of four eastern ports that were seized by rebels last summer. According to a deal struck on April 6th, Libya’s Zueitina and Hariga ports were supposed to reopen immediately, while the two larger ports, Ras Lanuf and Es Sider, should be surrendered within the next two to four weeks after more negotiations. Es Sider, the country’s largest port, has a daily capacity of 340 000 bpd, while Ras Lanuf can ship 220 000 barrels per day.

Further weighing on oil prices, the International Energy Agency said that Iran’s crude exports have surged well above their 1-million-bpd limit, set by the West under an interim deal, and have hit the highest level in 20 months.

Market players are looking ahead at upcoming data from China, the world’s second-biggest oil consumer, for further signs of economic slowdown and to gauge demand prospects. China’s National Bureau of Statistics is expected to report that the Asian economy grew by 1.4% in the first quarter, down from 1.8% in the last three months of 2013. Year-on-year, growth is expected to have slowed to 7.3% from 7.7% in Q4, below the government’s official target of 7.5% and near the minimum level needed to ensure stable employment.

Investors are also awaiting the release of key economic data from the US, including retail sales, consumer inflation, housing data, initial jobless claims and New York and Philadelphia manufacturing gauges.