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Oil near two-week high on Russian supply worries

London: Brent crude oil traded near a two-week high around $108 a barrel on Monday as tension between Russia and the West offset a rise in oil supply from Opec’s second-largest producer Iraq.

US Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov held talks on Sunday about ways to defuse the crisis over Ukraine, with Kerry telling Moscow progress depended on a Russian troop pullback from Ukraine’s borders.

The West is considering more sanctions on Russian industries including its oil and gas sector after the annexation of Crimea, and Russian military manoeuvres close to Ukraine’s borders are keeping investors on edge.

Investors worry that sanctions could lead to a disruption of Russian energy supplies, on which Europe relies heavily.

May Brent was at $107.90 a barrel by 1015 GMT, down 17 cents from Friday’s settlement, the highest since March 14.

US crude for May was down 20 cents at $101.47 a barrel after settling at the highest since March 7.

“Russian supply risks are keeping the market on edge,” said Carsten Fritsch, senior commodities analyst at Commerzbank.

“It would be impossible to replace Russian oil and gas in the short term, and it would be economic suicide for Europe to jeopardise those supplies. That’s why the risks of any disruption are probably very low.” Front-month Brent is set to post its first quarterly decline in three quarters, down about 2.5 per cent as rising supply from Iraq and increased exports from Iran have kept the market well supplied, offsetting disruptions in Africa.

Iraq has started production at the giant West Qurna-2 field, moving closer to its output target of 4 million barrels per day (bpd) this year.

Front-month US crude oil futures are set for more than a 3 per cent gain in the first quarter as new pipeline capacity drained oil from bloated inventories at the contract’s delivery point in Cushing, Oklahoma, to the Gulf coast.

US crude oil exports hit a 15-year high in January, helping ease a glut caused by booming shale oil output although exports are limited by law.

Meanwhile, flows from Libya’s Wafa oilfield to the western port of Mellitah are still blocked, state-run National Oil Corp (NOC) said.

Nigerian crude exports are set to fall to their lowest since 2009 due to a production outage for the Forcados grade.