Crude Oil Surges To End Above $97 On Ukraine Tensions

(RTTNews) - U.S. crude oil rebounded to end sharply higher Friday, on reports of escalating tensions between Russia and Ukraine over the ongoing conflict in eastern Ukraine. The uptick comes after oil prices plummeted two percent to a seven-month low yesterday on demand growth concerns.

Some upbeat economic data from the U.S. also boosted oil prices with industrial production increasing more than expected in July though consumer sentiment deteriorated more than anticipated.

Oil prices shot up on news that Ukraine armed forces have attacked and destroyed part of a Russian military column that entered the country overnight. The news ignited fears the situation could escalate and disrupt crude shipments out of Russia.

A convoy of Russian vehicles carrying aid for rebel-held areas in eastern Ukraine is waiting for permission of the Ukrainian government to enter the country. Kiev fears that the convoy could be a prelude to a possible Russian military intervention.

Recent data has shown an upswing in crude oil supplies amid signs that global demand for energy products may wane. Economic growth in Germany and France stopped in the second quarter, and the pace of China's growth is expected to slow.

Libya's exports are getting back online with the re-opening of its largest port, Es Sider, which was closed for nearly a year.

Light Sweet Crude Oil futures for September delivery, the most actively traded contract, soared $1.77 or 1.8 percent to close at $97.35 a barrel on the New York Mercantile Exchange Friday.

Crude prices for September delivery scaled a high of $97.41 a barrel intraday and a low of $95.32.

On Thursday, crude oil futures dropped 2 percent to its lowest since January, on demand growth concerns after some weak economic data from the U.S. and on the unexpected increase in U.S. oil stockpiles last week.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 81.45 on Friday, down from its previous close of 81.62 late Thursday in North American trade. The dollar scaled a high of 81.62 intraday and a low of 81.38.

The euro traded higher against the dollar at $1.3393 on Friday, as compared to its previous close of $1.3365 late Thursday in North American trade. The euro scaled a high of $1.3411 intraday and a low of $1.3359.

In economic news from the U.S., a Federal Reserve report showed industrial production to have risen by 0.4 percent in July, matching the upwardly revised increase reported for June. Economists expected production to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.

The bigger than expected increase in production was largely due to the jump in manufacturing output, which surged 1.0 percent in July after climbing by an upwardly revised 0.3 percent in June.

A preliminary report from Thomson Reuters and the University of Michigan on Friday showed U.S. consumer sentiment index for August dropped to 79.2 compared to the final July reading of 81.8. Economists expected the consumer sentiment index to inch up to a reading of 82.3.

The New York Fed said its general business conditions index dropped to 14.7 in August from 25.6 in July, although a positive reading continues to indicate an increase in regional manufacturing activity. The index has been expected to dip to a reading of 20.0. The bigger than expected pullback by the general business conditions index after having reached a four-year high in the previous month.

The U.S. Labor Department said its producer price index for final demand inched up by 0.1 percent in July after climbing 0.4 percent in June. The modest increase was in line with economists' estimates.

Higher food prices contributed to the modest increase by the producer price index, as food prices rose by 0.4 percent in July after falling by 0.2 percent in each of the two previous months.