Oil market gains ground

23rd May 2014, Comments 0 comments

World oil prices inched higher in subdued trade on Friday, gaining support from lingering concerns over tensions in Ukraine and Libya, and impressive economic growth in Germany.

The US benchmark, West Texas Intermediate (WTI) for delivery in July, added 12 cents to $103.86 a barrel.

Brent North Sea crude for July gained four cents to stand at $110.40 a barrel in London afternoon trading.

"Brent front month futures held fairly steady above $110... and are set for a second consecutive week of gains, mainly supported by ongoing tensions in Libya and Ukraine, and solid German GDP data," said analyst Myrto Sokou at the Sucden brokerage in London.

She added that traders were eagerly awaiting the outcome of this week's elections in both crisis-hit Ukraine, and across Europe.

"We expect further consolidation and sideways trading activity in the oil market today as risk appetite remains limited and investors could be cautious ahead of the Ukrainian and European election results."

Russian President Vladimir Putin warned Friday that the crisis in Ukraine had evolved into a full-scale civil war, blaming Washington for backing the overthrow of former president Viktor Yanukovych.

At least five people were killed Friday in fighting near Ukraine's eastern hub of Donetsk two days before a presidential election undermined by an upsurge in attacks by pro-Russian separatists.

The latest bloodshed on the heels of the deaths of 18 soldiers Thursday in the eastern rustbelt near Russia underscores the trouble the interim leaders have in making sure they can pull off a safe and well-attended vote Sunday.

In Libya, a renegade general's bid to rid the country of Islamists has also alarmed oil investors fearing a further crippling of the embattled North African state's output, which has been stunted until recently due to blockades by rebels.

Further support came from official data showing that the German economy powered ahead with 0.8-percent growth in the first quarter of 2014.

That was the biggest quarterly jump in German economic activity for three years, and stoked hopes of improving demand for crude oil.

Later on Friday, meanwhile, oil traders will digest US new home sales data out later Friday.

Desmond Chua, an analyst at CMC Markets in Singapore, said there were expectations that the data would show a "rebound from last month's weak reading".

"With construction activity, building permits and housing starts on a rise, we could see a turnaround in the next few months, even if today's figures were to disappoint," he said.

New home sales are seen as one of the key indicators of the health of the US economy.

Crude futures had rallied Wednesday following news of tumbling crude reserves in the United States, which signalled strong demand.

WTI jumped to a one-month peak at $104.07, while Brent struck a two-and-a-half-month high at $110.55.

The market pulled lower Thursday as many traders opted to cash in their profits.

© 2014 AFP

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