SINGAPORE: Brent crude futures firmed above $108 per barrel on Monday, supported by renewed tensions in Ukraine, where the conflict looks increasingly out of control and heightening the risk of disruption to energy supplies.
Pro-Moscow rebels claimed a resounding victory in Sunday's referendum on self-rule for eastern Ukraine with nearly 90 percent voting in favour. "If we see there's more escalation in Ukraine it will support US prices back up to $102 this week.
If US is $2 more than the current price, Brent will be $2.50-$3 more," said Jonathan Barratt, chief executive of Sydney-based commodity research firm Barratt Bulletin.
Brent crude for June delivery was up 34 cents at $108.23 by 0411 GMT after touching a 1-1/2-week high of $109.02 on Friday.
US June crude gained 11 cents at $100.10 a barrel afer peaking at $101.18 in the prior session, also a 1-1/2-week top. Saudi Arabia is willing to supply oil if there are shortages due to tensions over Ukraine, oil minister Ali Al-Naimipi said in the South Korean capital on Monday, where he is attending a conference. The key to the Ukraine crisis is whether the "conflict develops into civil wa
r rather than drags in Russia and the European Union or Russia and the US," Barratt said.
There would be wider implications for European energy supplies if Russia became directly involved, Barratt added.
The European Union, which called Sunday's plebiscite illegal, could strengthen sanctions against Russia after Moscow annexed Ukraine's Crimea region following a similar vote in March.
Foreign ministers from the 28-nation bloc are due to meet on Monday to decide whether to add about 15 people and several Crimean-based companies to its list 48 Russians and Ukrainians already targetted with asset freezes and visa bans.
Investors are also keeping an eye on industrial production and retail sales data which China will release on Tuesday. "I expect industrial production to be softer," Barratt said. "The premier [Li Keqiang] came out at the weekend that China had to get used to 7.5 percent growth as the new norm.
It's about the third time he's said this," Barratt said. Such lower growth compared with the 10 percent in previous years would "weigh heavily on oil prices". Negotiators from Iran and the International Atomic Energy Agency will meet in the Austrian capital Vienna on Monday, a day before talks resume between Tehran and six western nations over Iran's nuclear programme.
The two sets of talks are separate but closely linked as both focus on fears that Iran may be covertly seeking the capability to develop nuclear weapons.
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