Twenty one people have been rescued, and a further 24 people are still missing following the blast in a quiet suburb in Yevpatoriya.
Yevpatoriya Mayor Andrei Danilenko said oxygen containers kept in the basement may have exploded.
An investigation is underway, and a criminal case has been launched.
Ukrainian Prime Minister Yulia Tymoshenko, who made a personal visit to Yevpatoriya, promised compensation to those injured and the families of the killed. She said $12,800 would be paid for every victim, while those left homeless would be given new housing later this year.
"The government made such a decision earlier in the day," Tymoshenko announced before leaving Kiev.
Ukraine's President Viktor Yushchenko also said he would visit the scene. He declared December 26 a day of mourning for those killed in the incident.
The Russian president offered Kiev on Thursday the services of the Black Sea Fleet following the blast, a Kremlin spokesman said.
"If need be suitable units from Russia's Black Sea fleet, based in Sevastopol, could help in the rescue operation," Dmitry Medvedev said in a message of condolence to his Ukrainian counterpart.
