LONDON: Global oil prices rose close to $110 a barrel on Wednesday due to mounting tensions in Ukraine, but gave up some gains after an unexpectedly large build in crude stocks in the United States, the world's largest consumer of oil.
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 rose by a dollar earlier in the session but pared gains to trade around 54 cents up at $109.90 a barrel by 1520 GMT, its highest since March 4. The May contract expired on Tuesday.
U.S. crude for May delivery also rose more than $1, but pared gains immediately after closely-watched data form the U.S. Energy Information Administration (EIA) to trade up 10 cents at $103.85 a barrel at 1521 GMT.
Crude oil stocks rose by 10 million barrels to 394.14 million last week, much more than the 2.3 million barrel build forcecast, the EIA said.
But stocks at the Cushing, Oklahoma delivery hub, which have a major influence on U.S. oil prices, reached their lowest level since October 2009.
Brent's premium to U.S. West Texas Intermediate crude narrowed on Wednesday. It remains at its widest in two weeks, lifted by oilfield maintenance that has curbed supplies of North Sea crude grades as well as tensions in Ukraine.
"For Brent/WTI, there is a growing realisation that the United States is not short of crude and that Cushing is an island of scarcity in a sea of plenty," 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.
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