London: Oil climbed towards $109 a barrel on Monday as rising tensions in Ukraine added to concern about supplies, though a survey showing China’s manufacturing sector contracted for a fourth month in April limited the rally.
Pro-Russian militants stormed a Ukrainian police station in Odessa on Sunday and freed nearly 70 fellow activists. Earlier, more than 40 pro-Russian activists died in a blaze at a building they had occupied after clashes with pro-Kiev groups.
Brent crude for June delivery was 22 cents higher at $108.81 a barrel by 0843 GMT, after settling 83 cents higher on Friday. US crude was up 61 cents at $100.37, having risen 34 cents on Friday.
“There hasn’t been any lessening of tensions in Ukraine, which is keeping the geopolitical premium in the market,” said Christopher Bellew, a broker at Jefferies Bache in London.
“Prices have gone back into the trading range of about $107.50 to $110 for Brent.” Rising tension in Ukraine matters to energy markets because Russia has said it would reduce natural gas supplies to Ukraine in June if no prepayment is received this month, raising concern that energy supplies to the European Union could be affected.
Russia meets a third of the EU’s gas demand, and almost half of that passes through Ukraine. Russia also ships crude oil through Ukraine to countries in Eastern Europe via the Druzhba pipeline.
“It is a concern and it could be a positive for Brent given the supply chain in Europe,” said Ben Le Brun, a market analyst with OptionsXpress in Sydney.
Keeping a lid on the rally was a survey showing activity in China’s manufacturing sector contracted for a fourth consecutive month in April, adding to questions over whether the economy of the world’s second-biggest oil consumer is still losing momentum.
The final reading of the HSBC/Markit purchasing managers’ index (PMI) for April came in at 48.1, lower than a preliminary reading of 48.3 but up slightly from an eight-month low of 48.0 in March.
The disappointing survey came after the US economy — the world’s top oil consumer - added 288,000 jobs in April, more than expected and the largest increase since January 2012, helping to lift oil prices on Friday.
Also supporting Brent is the continuing shutdown of the bulk of Libya’s oil output because of strikes and protests and the limited progress of efforts to restore supplies.
Libyan tribesmen have ended their blockade of the Al Sharara oilfield, but production cannot resume until a separate protest at a connecting pipeline is resolved, an oil official said on Sunday.
