Ukraine has given pro-Russian separatists a Monday morning deadline to disarm or face a "full-scale anti-terrorist operation" by its armed forces, while the United States and the European Union mull tougher sanctions against Russia if separatist action continues. However further gains may be limited due to ample supplies and a weak demand outlook.
Brent crude rose 52 cents to $107.85 by 0604 GMT, after gaining 0.6 per cent last week. It hit an intra-day high of $108.04. U.S. oil climbed 44 cents to $104.18 after settling 34 cents up in the previous session.
Oil may see only a slight upside as the crisis is unlikely to have a direct impact on global oil supplies.Russia has amassed 35,000-40,000 troops near the Ukrainian border in addition to the 25,000 troops it recently moved into Crimea, Lyall Grant, Britain's U.N. ambassador said.
As the crisis worsens, the United States may step up sanctions, likely targeting Russians close to President Vladimir Putin as well as Russian entities. However, they will not necessarily target entire Russian business sectors such as mining, banking and energy. Separately, EU foreign ministers will meet on Monday to discuss how to toughen sanctions against Russia.
The EU's Energy Commissioner Guenther Oettinger is expected to discuss the threat of a "gas war" at Monday's meeting of foreign ministers. Putin wrote to 18 EU leaders last week telling them Russia would cut gas supplies to Ukraine if it did not pay its bills and said this could lead to a reduction of onward deliveries to Europe.
The tensions overshadowed expectations of more Libyan crude coming into the market and potentially weighing on Brent prices amid a weak demand outlook from top consumer China.Libya's western Zawiya oil port has resumed operations after protesters vacated the entrance to the facilities and the adjoining refinery will restart in about 24 hours, a spokesman for the state oil company said.The National Oil Corp spokesman added that there were continuing issues with protesters in the area but they hoped to resolve these in the next few hours.
Further gains in prices are also limited as investors await fresh data from the world's second-biggest consumer China. Growth may have slowed to 7.3 per cent in the first quarter from 7.7 per cent in the final three months of 2013. This would be the slowest pace of growth in five years and near the minimum level needed to ensure stable employment.
Solid US data and better access to inventories held at the Cushing, Oklahoma, delivery hub has helped West Texas Intermediate to outperform Brent by 9 per cent since the start of this year, ANZ analysts said in a note on Monday.
"Cushing inventories at the hub are at the lowest point since late 2009 due to the January opening of the southern leg of the Keystone pipeline. This has resulted in more crude being available to Gulf refiners, and consequently, more refined US oil being available to the export market," the note said.