LONDON: Brent crude oil prices rose towards $103 a barrel on Friday as escalating violence in Ukraine kept Europe's markets on edge, but prices were still on track for a monthly loss as ample supply and weak demand outweighed political concerns.
The European benchmark oil contract had plunged over 12 percent from a nine-month high in June to a 14-month low last week as weak demand led to an oil supply glut.
Prices rose on Friday after the government in Kiev said Russian troops had entered the country in support of pro-Moscow rebels, intensifying a separatist war and prompting alarm among Kiev's Western allies, as well as fears of new sanctions that could target Russia's energy sector.
Russia is Europe's biggest supplier of oil, coal and natural gas, meeting around a third of demand for all those fuels, according to Eurostat data.
It receives in return some $250 billion a year, or around two-thirds of government revenue.
Brent rose 28 cents to $102.74 a barrel by 1154 GMT and US crude gained 28 cents to $94.83 a barrel, underpinned by US data showing second-quarter growth was faster than initially reported.
Even after Friday's increases, oil prices on both sides of the Atlantic were on track for a loss of more than 3 percent for the month.
Analysts said a suspension of Russian oil exports remained improbable despite the crisis. "It is extremely unlikely that Russia would suspend oil shipments in the event that further sanctions were to be imposed.
Instead, the already subdued oil demand could dwindle yet further," Germany's Commerzbank said on Friday. The main cause for the recent fall in oil prices is that weakening demand is being met by rising production.
West African crude exports to Asia were near record levels in September, a Reuters survey of traders showed, and the North Sea market remained well supplied as well. Production from the Organization of the Petroleum Exporting Countries (OPEC) also rose, despite conflicts in Iraq and Libya.
OPEC, which supplies a third of the world's oil, raised its output in August from July, with higher supply from Libya, Angola and Iran, another Reuters survey found.
But analysts expect oil prices to strengthen if the situation in Ukraine worsens.
"(The) Geopolitical risk premium in oil has deflated prematurely.
Investor deleveraging has led to a price correction," BNP Paribas analysts said in a note. "But geopolitical tension has not disappeared and remains an upside risk for oil prices."
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