SINGAPORE (Reuters) - Brent and US crude oil rallied more than US$2 per barrel to multi-month highs on Monday, lifted by rising tension in Ukraine after Russian President Vladimir Putin declared he had the right to invade his neighbour.
Russia is the world's biggest oil producer and Ukrainian Prime Minister Arseny Yatseniuk said Moscow's move to use military force was a "declaration of war".
Putin secured permission from his parliament on Saturday to use military force to protect Russian citizens in Ukraine and told United States President Barack Obama he had the right to defend Russian interests and nationals, spurning Western pleas not to intervene.
Brent crude hit a session peak of US$111.24 per barrel, its highest since Jan 2, and was up US$1.48 at US$110.55 by 10.08am Singapore time.
US crude futures jumped as much as US$2.06 to US$104.65 a barrel, the highest since Sept 23. They were later up US$1.20 at US$103.80.
"Oil markets are reacting on the potential that the situation could worsen," said Ben Le Brun, a market analyst at OptionsXpress in Sydney. "We don't see any fundamental impact on oil markets yet, and it is still very much sentiment driven.
"But I definitely suspect oil will move much higher, if it actually comes to war. US crude could easily surpass US$110 and a US$120 target is not out of the question."
The tensions come at a nervous time for markets as activity in China's factory sector slowed to an eight-month low in February, a government survey showed on Saturday, reinforcing signs of a modest slowdown in the world's No. 2 economy as demand weakens.
The situation in Ukraine pressured Asian stocks on Monday, forcing anxious investors to cut their exposure to riskier assets in favour of traditional safe haven bets such as the Japanese yen and Swiss franc.
"There is nothing much you can do to calculate the risk premium in the current situation. We just have to wait and see how it develops," said Le Brun.