Oil prices rise on Ukraine tensions

Oil futures rose Friday after Ukraine said its military attacked and destroyed a Russian convoy, sparking fears that tensions between the two countries could escalate further.



Ukraine, backed by the West, has for weeks accused Russia of sending men and heavy weapons to pro-Russia rebels that hold several towns and cities in Ukraine's east. Russia has denied sending men and weapons into Eastern Ukraine.



Oil-market participants have watched tensions between Ukraine and Russia for months amid concerns that Western sanctions against Russia could halt the country's oil exports, which are mostly sold in Europe and Asia. Russia is the number two oil-exporting nation.



So far, sanctions have yet to affect Russia's near-term oil output.



Light, sweet oil for September delivery recently traded up $US1.08, or 1.1 per cent, at $US96.66 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, climbed $US1.34, or 1.3 per cent, to $US103.41 a barrel on ICE Futures Europe.



Both contracts are still set to post losses for the week. Weak global demand has worried market watchers and pushed prices lower in recent weeks.



"This is all Ukraine-Russia right now," said Bill Baruch, senior market strategist at brokerage iiTrader in Chicago.



Traders who had bet on lower prices are closing out their wagers, he said. "Anybody who sold crude is wondering how bad it can get," he said. "Now we're headed into the weekend, there's definitely a fear of selling."



However, other analysts questioned whether the market's bounce can last.



Prices fell overnight after Iraq's prime minister relinquished power Thursday.



"The Iraqi news is far more relevant to oil than what's going on in Ukraine," said Stephen Schork, editor of industry newsletter The Schork Report. "If you're buying Brent because of this story in the Ukraine, then I'll be more than willing to sell it to you."



Front-month September reformulated gasoline blendstock, or RBOB, recently traded up 3.87 cents, or 1.5 per cent, at $US2.7053 a gallon.



September diesel rose 2.35 cents, or 0.8 per cent, to $US2.8430 a gallon.