Brent Above $107 on Ukraine, U.S. Oil Gap Narrows

Brent crude inched higher above $107 a barrel on Wednesday, underpinned by tensions in Ukraine, though its premium over U.S. prices narrowed after an industry report showed a sharp draw in inventories in the world's largest oil consumer.

Prices pared gains, however, after Russian President Vladimir Putin called for separatists in the east of Ukraine to postpone an independence referendum this weekend, in a possible sign of moves to ease the crisis.
 

Brent rose 19 cents to $107.25 a barrel by 1414 GMT, off an earlier high of $107.60.

U.S. crude rose 58 cents to $100.07 a barrel, off an earlier high of $100.59. The Brent-WTI spread <CL-LCO1=R> narrowed to $7.18 a barrel, earlier touching $6.83, its narrowest in more than a week.

Crude inventories in the United States fell by 1.8 million barrels last week, albeit from record-high levels, the American Petroleum Institute (API) said late on Tuesday.

The API said stocks at the Cushing, Oklahoma delivery hub of the U.S. oil futures contract - known as West Texas Intermediate (WTI) - fell by 1.5 million barrels.

"WTI has found some support from the API numbers, the fall in total stocks and also a strong decline in Cushing stocks," Commerzbank analyst Carsten Fritsch said.

Investors are awaiting confirmation of the API numbers from the U.S. government's Energy Information Administration, which releases its more closely watched data at 1430 GMT.

While the surprise fall in crude inventories lifted WTI prices, analysts cautioned that the flow of stocks from Cushing could soon ease.

"The pace of withdrawals has been slowing since early spring, and it's already in the price unless we see anything surprising," Andrey Kryuchenkov of VTB Capital said.
 

Brent found further support from tensions in Libya, where rebels occupying oil ports in the east of the country said they would not deal with new Prime Minister Ahmed Maiteeq, despite an agreement last month to reopen four ports.
 

Protests at Libya's major oilfields and ports have decimated its oil production from around 1.4 million barrels per day until mid-2013 to just over 250,000 bpd, and slowed exports to a trickle.
 

Unrest also hit oil infrastructure in Yemen where assailants blew up its main oil export pipeline, halting crude flows.
 

Risk of Ukraine Civil War
Tensions in Ukraine and the possibility of the country slipping into civil war have boosted oil prices, as traders weighed the risk of supply disruptions from Russia, the world's second-largest oil exporter.
 

Separatists who had called a referendum this weekend in the eastern region of Donetsk said on Wednesday they would discuss Putin's call for them to postpone it.
 

The Obama administration is working on new sanctions to impose on Russia if it ramps up aggression against Ukraine, such as preventing national elections from taking place or recognising the separatist referendum, U.S. officials said on Tuesday.

While gas and oil supplies have not been significantly disrupted by the Ukraine situation so far, traders and analysts say the risk remains that the United States and European Union could target the Russian energy industry, or Moscow could choose to restrict exports.

(By David Sheppard and Julia Fioretti, Additional reporting by Jacob Gronholt-Pedersen in Singapore; Editing by Susan Thomas and Dale Hudson)