Brent steady above $108, Ukraine tensions support

By Keith Wallis

SINGAPORE (Reuters) - Brent crude held above $108 a barrel on Tuesday, supported by the threat of further European sanctions against Russia over Ukraine but with little impetus to move higher.

The European Union imposed sanctions on a top aide to Russian President Vladimir Putin and the commander of Russian paratroopers as well as two confiscated Crimean energy companies, raising pressure on Moscow over its actions in Ukraine.

"The market has a fairly high tolerance to what's happening in Ukraine," said Ric Spooner, chief market analyst at CMC Markets in Sydney, adding that the risk of more sanctions or Ukrainian regions joining Russia had been factored into prices.

"The market wants to see a clear and present danger before reacting," Spooner said.

Brent crude for June delivery slipped 8 cents to $108.33 a barrel by 0703 GMT, after closing 52 cents up in the previous session.

U.S. crude rose 3 cents to $100.62 per barrel, after climbing 60 cents to $100.59 a barrel in the previous session.

WTI futures were being supported by analyst expectations of a further draw in crude oil inventories, as the U.S. nears the start of its higher fuel demand summer driving season, ANZ analysts said in a note.

A Reuters poll of four analysts on Monday forecast U.S. commercial crude oil stocks would remain unchanged at 397.6 million barrels in the week to May 9.

The survey was taken ahead of weekly inventory reports from industry group, the American Petroleum Institute (API) and the U.S. Department of Energy's Energy Information Administration (EIA).

Pro-Moscow rebel leaders in Donetsk called on Monday for it to become part of Russia, although Moscow appeared to use the referendum results to put pressure on the Ukraine government in Kiev to hold talks with rebels in the two break away regions.

Saudi Arabia's oil minister pledged the world's biggest oil exporter would boost supplies if there was any disruption caused by the crisis in Ukraine.

Aside from the Ukraine crisis, "demand conditions for Brent have been quite weak reflecting slowing in China," said Vyanne Lai, oil analyst with National Australia Bank. Libyan moves to increase output would also weigh on Brent.

Growth in China's industrial production and retail sales for April came in below forecasts on Tuesday, further confirming a slowdown in growth in the world's second-largest economy amid a government reform drive.

Industrial production climbed 8.7 percent against a forecast 8.9 per cent and was the slowest growth in five years, while retail sales rose 11.9 per cent, the weakest in more than five years, compared with an estimate of 12.2 percent.

China's implied oil demand in April climbed 1.1 percent to 9.71 million bpd from a year earlier, according to a Reuters calculation based on preliminary data.

Investors are also keeping an eye on U.S. data due for release later on Tuesday, especially April's retail figures, CMC's Spooner said.

"We've seen a rebound in the last couple of months. The market is interested to see if the momentum is maintained," he said, adding the market is looking for a 0.4 percent rise in retail sales.

Libya said its western oilfields and pipelines, which have been blocked by protests since March, would reopen on Monday night, potentially raising Libyan crude output by 500,000 barrels per day (bpd).

"It's only got to be a matter of time before Libya increases production," said Lai.

Investors are also watching progress of the resumption of talks on Tuesday between Iran and six world powers over Tehran's controversial nuclear programme.

Talks between Iran and the International Atomic Energy Agency ended inconclusively on Monday with no clear indication whether progress on an agreement over Iran's nuclear programme had been achieved.

(Reporting By Keith Wallis; Editing by Richard Pullin)