New York: Oil prices rose 5% on Monday as Israel’s deepening incursion into Gaza and a dispute between Russia and Ukraine over natural gas heightened fears of supply disruptions.
US crude gained $2.47 to settle at $48.81 a barrel, after touching a three-week high of $49.28. London Brent crude rose $2.71 to $49.62 a barrel.
Oil prices have risen from around $35 a barrel since Israel launched its Gaza offensive on 27 December, heightening fears of possible disruptions of crude supplies from the Middle East.
An Iranian military commander called for Islamic producers to cut supplies to Israel’s supporters in Europe and the United States, the official IRNA news agency reported on Sunday.
But an Opec source told Reuters the Iranian comments would not sway other members of the Organization of the Petroleum Exporting Countries.
“There are no plans to do this and I think it is very unlikely,” the OPEC source told Reuters on Monday.
Opec’s most influential member, Saudi Arabia, and its neighbours Kuwait, the United Arab Emirates and Qatar, are regional allies of the United States.
But analysts said heightened tensions in the Middle East - origin of a third of the world’s crude - would remain supportive of oil prices.
Mounting evidence of Opec’s compliance with production cuts, and the US Energy Department’s decision to start rebuilding its crude reserves, also have supported oil prices.
Oil remains down nearly $100 a barrel from its peak in July as global economic turmoil cuts into fuel demand.
Adding to geopolitical concerns, Russian natural gas supplies to southeast Europe have declined as a result of Russia’s stand-off with Ukraine over prices, which began on New Year’s day. The two sides blame each other for the dispute.
European energy companies, which receive about a fifth of their gas via pipelines through Ukraine, said they had stockpiled enough gas for several days, but analysts predicted problems if the dispute persisted.
The dispute, which recalls a similar confrontation three years ago that disrupted supplies, was likely to raise new questions in Europe about Russia’s reliability as a gas supplier.
The market also will look for further signs of Opec production cuts, after Libya and Abu Dhabi’s National Oil Co joined leading producer Saudi Arabia, vowing to cut output by January as Opec tries to stem the $100 a barrel drop in oil prices since July 2008.
Senior Opec officials have suggested the producer group could meet in mid-January or February to review the oil market’s performance after announcing steep production cuts last month, although an Opec source told Reuters on Monday that was unlikely.
Monday’s gains were tempered by an uptick in the value of the US dollar against other currencies.