Oil prices up as Russia-Ukraine tensions escalate

Oil prices edged higher in Asian trade Monday on escalating Russia-Ukraine tensions that had Moscow and the West locking horns at emergency UN talks, analysts said.

US benchmark West Texas Intermediate (WTI) for May delivery gained 50 cents to $104.24 per barrel in afternoon trade while Brent North Sea crude for May rose 58 cents to $107.91.

Analysts said the oil market was spooked after Ukraine’s acting president Oleksandr Turchynov on Sunday accused Russia of waging war in his country’s east and declared the launch of a “full-scale anti-terrorist operation” that left at least two dead.

At United Nations Security Council talks, Russia blamed the rising tensions on the pro-Western interim government in Kiev, while Britain, France and the United States pointed the finger at the Kremlin.

“The weekend news of rising tensions in eastern Ukraine and Russia have helped support the gains in Brent and WTI prices,” Desmond Chua, market analyst at CMC markets in Singapore, told AFP.

With Ukraine a key conduit for Russian gas to Europe, traders fear that any full-scale armed conflict will disrupt supplies and send oil and gas prices skyrocketing.

Russian deliveries account for 34 percent of the natural gas supplies to the European Union, according to the Soufan Group, a US-based intelligence firm.

Chua said dealers are keeping a close watch on Libya after its prime minister Abdullah al-Thani stepped down on Sunday, saying that he and his family had been victims of an armed attack the previous day.

The move “caused a stir in Brent prices”, Chua said.

The North African state, a member of oil producing cartel OPEC, had already been in focus before the announcement on Sunday as the government and rebels agreed to reopen shuttered terminals.

The seizure by rebels of four eastern oil terminals in July in pursuit of their campaign for restored autonomy for the eastern Cyrenaica region slashed output from 1.5 million barrels per day to just 250,000.

Renewed oil exports will restore a much-needed revenue stream for the weak central government following the 2011 overthrow of the late Muammar Qaddafi.