SINGAPORE: Brent crude climbed towards $109 a barrel on Monday supported by rising tensions in Ukraine although a private survey showing China's manufacturing sector contracted for a fourth consecutive month in April prevented stronger gains.
China's economy continued to lose momentum in April with the HSBC/Markit final purchasing managers' index reading easing to 48.1, lower than a preliminary reading but up slightly from an eight-month low in March.
"This shouldn't be a huge shock to oil markets," said Ben Le Brun, a market analyst with OptionsXpress in Sydney.
Brent crude for June delivery was 18 cents higher at $108.77 per barrel by 0721 GMT, after settling 83 cents higher. U.S. oil was 42 cents higher at $100.18, following a rise of 34 cents on Friday.
Brent was supported by increasing tension in Ukraine over the weekend as violence moved to the western part of the country, with dozens of pro-Russian activists killed in a blaze at a building in Odessa they had occupied after clashes with pro-Kiev groups.
Pro-Russian militants then stormed a police station in Odessa on Sunday and freed nearly 70 fellow activists.
Russia has said it would reduce natural gas supplies to Ukraine in June if no prepayment is received this month, raising concerns that energy supplies to the European Union could be affected.
A third of the EU's gas demand is met by Russia, with almost half of that passing 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 Le Brun of OptionsXpress.
The disappointing Chinese manufacturing number came after the U.S. economy added 288,000 jobs in April, more than expected and the largest increase since January 2012, which helped lift oil prices on Friday.
"The robust releases underpinned strong recovery in the U.S. economy after the bitter winter slump, (and) this highlights optimistic demand prospect in crude oil going forward," analysts at Phillip Futures said in a note.
With Washington in the process of curtailing its massive monetary stimulus, which has helped support oil prices, the loss of steam in China's growth engine in the past year has left investors second-guessing about possible stimulus measures from Beijing.
Supply from Libya remained limited even after tribesmen ended their blockade of the El Sharara oilfield as production cannot resume until a separate protest at a connecting pipeline is resolved, an oil official said on Sunday.
Iraq's monthly oil exports reached 2.512 million barrels per day (bpd) in April, rising from 2.139 million bpd in March. Exports from the south of the country, where the bulk of Iraq's crude is produced and shipped abroad, reached its highest since 2003. (Reuters)