Oil Prices Boosted on Ukraine's Political Crisis

Worsening geopolitical tensions over Ukraine is keeping Brent futures above $107 per barrel (bbl), despite strong industry data form the United States which showed that crude stockpiles in the country increased six times more than expected.

The stand-off between Russia and the West over Ukraine is rumbling along, as US Secretary of State John Kerry said that Russian agents were stirring separatist tensions in Ukraine's east, where pro-Russian protestors have taken over government buildings in recent days.

Events in Ukraine's eastern cities of Donetsk, Kharkiv and Luhansk are unlikely to affect oil supplies directly, but investors are cautious that tensions on the ground could spark a geopolitical crisis.

"Tensions between the West and Russia could lead to unexpected consequences and that's what the market is worried about," Victor Shum, vice-president of energy consultancy IHS Energy Insight, told Reuters.

"But prices are overheated at this point and I do see them on an easing trend, but only moderately," he said.

The key Brent crude contract is currently at $107.81/bbl as of 1123 GMT.

The US Light Sweet Crude contract is at $102.45/bbl after recovering from a drop to $102.23 earlier in the day.

Investors are also keeping an eye on developments in Opec-member Libya, where the country's oil protection force hasn't gained full control of the Zueitina port, despite the government reaching a deal with the rebel forces that occupied the port for months.

Militiamen, part of a federalist rebel group seeking greater autonomy from Tripoli, remained at the facility on Tuesday. Members of the same group remain in control of the country's largest ports Es Sider and Ras Lanuf.

Oil prices are also strengthening amid expectations of increased US demand. The US Energy Information Administration raised its oil demand growth forecast for the year to around 1.23 million barrels per day (bpd).

However, the groups also cut its oil demand forecast for 2015 to 1.36 million bpd.