Oil settles higher, spurred by Russia-Ukraine drama, FOMC minutes

Reuters with

Crude staged a rally on Wednesday as rising tension between Russia and Ukraine overshadowed the bearish impact of a substantial rise in crude oil stockpiles in the United States.

While the Ukraine crisis may not directly impact global oil supplies and trade, the risk premium on oil is rising as investors worry the Kremlin's standoff with the West could quickly take a turn for the worse.

Russia dismissed as "groundless'' concerns in Kiev and the West over the presence of its troops near the border with Ukraine, saying they posed no threat, and accused Washington of fueling tension in the region. U.S. Secretary of State John Kerry on Tuesday said Russian agents and special forces were stirring separatist unrest in eastern Ukraine.

Source: Denver International Airport

U.S. crude inventories rose by 4 million barrels in the week to April 4, data from the Energy Information Administration (EIA) showed, compared with analysts' expectations for an increase of 1.3 million barrels.

Figures released on Tuesday from industry group the American Petroleum Institute showed a build of 7.1 million barrels. But a steeper-than-expected fall in gasoline stocks is setting a floor under the U.S. oil benchmark as the drawdown adds to evidence of a broad economic recovery and robust demand as summer driving season gets underway. U.S. gasoline stocks fell by 5.2 million barrels, according to the EIA, compared with expectations of a 700,000 barrel decline.

Brawl breaks out in Ukraine parliament

rose 20 cents to near $108 a barrel. U.S. oil shrugged off pressure from the inventory data, rising $1.04 to settle at $103.60, its highest close since early March. Crude held gains after the Federal Reserve's minutes showed the policy committee thought its former guidance on unemployment was "outdated."

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