Oil up 5 percent on global tensions

By Richard Valdmanis

NEW YORK (Reuters) - Oil prices rose nearly 5 percent on Thursday, the biggest percentage gain in more than two months, driven by rising tensions between the United States and energy behemoth Russia.

Prices have rebounded more than $9 from lows earlier this week, which put a dramatic end to a slide of more than $20 since mid-July, leaving analysts mixed over whether oil's next big move is up or down.

"This is a geopolitically driven bounce," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. "But it might be premature to say that we've seen the bottom as the market's focus could revert very quickly to demand deterioration."

U.S. crude gained $5.62, or 4.86 percent, to settle at $121.18 a barrel, the biggest percentage gain since June 6. London Brent crude climbed $5.80 to $120.16.

Oil is down sharply from the record high of $147.27 a barrel reached July 11 -- a slide triggered by evidence of a global slowdown in energy demand -- but it remains up about 20 percent so far this year and about sixfold since 2002.

Thursday's gains came after Russia, the world's second-largest oil exporter, said it would respond with more than just a diplomatic protest to a U.S. deal with Poland to station parts of a U.S. missile defence shield on Polish soil.

Relations between Russia and the West had already been strained by Moscow's military intervention in Georgia, a conflict that has already disrupted the transit of Azeri oil through the region.

The U.S.-Russia spat adds to a list of other political factors that have supported oil prices in recent months, such as the dispute over Iran's nuclear program and repeated militant attacks on oil facilities in Nigeria.