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Brent Crude Climbs to Two-Week High on Ukraine; WTI Spread Rises

April 14 (Bloomberg) -- Brent crude advanced to a two-week high as tensions escalated between Ukraine and Russia, the world’s biggest energy exporter. West Texas Intermediate moved between gains and losses.

Futures rose as much as 1 percent in London. Russia called for an emergency meeting of the United Nations Security Council after Ukrainian security forces clashed with pro-Russian gunmen in the eastern town of Slovyansk. European officials weighed expanding sanctions against Russia over Ukraine, where they say the government in Moscow is stoking deadly separatist unrest with the same methods it used to destabilize and annex Crimea.

“The situation in Ukraine deteriorated significantly over the weekend, which explains the strength in Brent,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The upsurge in unrest justifies trading at these levels.”

Brent for May settlement increased 71 cents, or 0.7 percent, to $108.04 a barrel on the London-based ICE Futures Europe exchange at 10:32 a.m. in New York. It earlier touched $108.38, the highest intraday level since March 28. The volume of all futures traded was 23 percent above the 100-day average.

WTI for May delivery gained 13 cents to $103.87 a barrel on the New York Mercantile Exchange. Volume was 73 percent above the 100-day average.

The U.S. benchmark grade traded at a $4.17 discount to Brent. The spread shrank to $3.28 on an intraday basis on April 11, the least since Sept. 20.

Gunmen Firing

In Ukraine, camouflaged gunmen fired on government forces near Slovyansk, 150 miles (240 kilometers) from the Russian frontier, Ukrainian Interior Minister Arsen Avakov said. “Henchmen” of the government in Kiev are organizing attacks with the backing of Western nations, Russia’s Ambassador to the United Nations Vitaly Churkin said at an emergency session of the Security Council in New York.

“There do have to be consequences to a further and further escalation by Russia,” U.K. Foreign Secretary William Hague told reporters before meeting with European Union foreign ministers today in Luxembourg. “I will be arguing today that further sanctions have to be the response to Russia’s behavior.”

A halt of Russian crude and natural gas supplies through Ukraine “could be hugely impactful,” according to Ed Morse, the head of commodities research at Citigroup Inc. Any sanctions on Russia’s energy industry would cause prices to “spike much higher,” he said in a report today.

Hedge funds and other money managers boosted net-long positions on WTI by 10 percent to 331,056 futures and options in the week ended April 8, according to the U.S. Commodity Futures Trading Commission. Bets on rising prices were at the highest level for this time of year since at least 2006, according to data from the Washington-based regulator.

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