Russian state news agency RIA said Russian-backed rebels in eastern Ukraine on Thursday used mortars to attack the territory of Kyiv government forces, violating agreements aimed at ending the conflict.
Oil recovered some of the more than 2% decline in Asian trade on Thursday after Russian-backed rebels in eastern Ukraine accused Kyiv government forces of harassing their territory with mortar shells.
Brent crude was down 0.6% at $94.2/barrel at 0420 GMT, after previously falling more than 2%.
West Texas Intermediate (WTI) crude fell 0.7% to $92.98 a barrel at 0422 GMT, after previously falling more than 2%.
The escalation of the conflict with the Donbas separatists, which has been going on for years, could fuel tensions between Russia and the West. The West has threatened Moscow with new sanctions in the event of an attack, as Russia is massing more than 100,000 troops on its border with Ukraine.
The positive news from the US-Iran nuclear talks is providing much-needed relief to global oil prices. It is clear that re-establishing the agreement will increase supply.
France said on Wednesday that Iran is only days away from saving the 2015 nuclear deal with world powers and that it is now up to Tehran to make the political choice. Tehran urged Western powers to be “realistic”.
Oil fell in the early hours after France and Iran, but tensions over Ukraine offset the decline.
South Korea, formerly one of Tehran’s leading oil customers in Asia, said Wednesday that it is in working-level talks on releasing Iranian funds if the new deal begins and continuing imports of Iranian crude oil.
Oil markets have been dominated in recent weeks by Russia’s menacing stance towards Ukraine and concerns that supply cuts by one of the main oil producers in a tight global market could push oil prices to $100 per barrel.
Thus, markets have priced in Russia-Ukraine tension that would lead to supply disruption in an already tight supply situation in oil. Russia’s announcement of a partial pullback of troops from near Ukraine earlier this week dropped the tension simmering relatively.