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Oil surges on news of Ukraine attack on Russian convoy

Oil prices rebounded on Friday (Aug 15) amid mounting Ukraine geopolitical tensions after Kiev said Ukrainian forces had destroyed part of a Russian military convoy that entered its territory.

NEW YORK: Oil prices rebounded on Friday (Aug 15) amid mounting Ukraine geopolitical tensions after Kiev said Ukrainian forces had destroyed part of a Russian military convoy that entered its territory.

US benchmark West Texas Intermediate for delivery in September, which had lost more than $2 Thursday, advanced $1.77 to close at $97.35 a barrel on the New York Mercantile Exchange.

Brent North Sea crude for October jumped $1.46 to $103.53 a barrel in London trade. The European benchmark futures contract for September on Thursday tumbled $2.27 on its last day of trade.

The announcement by Ukrainian President Petro Poroshenko that government artillery had destroyed a "considerable part" of the convoy late Thursday after it crossed into Ukraine rattled markets.

The reports sent US and European stocks tumbling into the red, though Wall Street later rebounded.

"When we saw the headlines about Ukraine attacking this convoy, it made the market nervous about a Russian invasion that can lead to other conflicts," said Andy Lipow, an independent analyst.

Russia, which has repeatedly rejected Western claims that it is backing the pro-Russia insurgency in Ukraine, denied that it had sent a military convoy into Ukraine. Russia is the world's second-biggest oil producer and Ukraine is a major conduit for Russian natural gas exports to Europe.

"Although we have yet to see any supply disruption, a further escalation of the conflict certainly could lead to perhaps a disruption to gas supply transiting though Ukraine which could lead to the European Union buying more oil," Lipow said.

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