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Crude above $46 on Gaza unrest
Oil prices jumped to a three-week high yesterday after an Iranian military commander called for an oil boycott over Israel's offensive in the Gaza Strip, and on the Russian gas supply row.
- Reuters
- Published: 23:35 January 5, 2009
- Workers at a refinery in Bosnia. Oil prices have risen by more than 25 per cent since Israel launched its offensive against Hamas on December 27.
- Image Credit: Reuters
London: Oil prices jumped to a three-week high yesterday after an Iranian military commander called for an oil boycott over Israel's offensive in the Gaza Strip, and on the Russian gas supply row.
A strong start to the new year for stock markets, mounting evidence of the Organisation of Petroleum Exporting Countries' (Opec) compliance with production cuts, and the US Energy Department's decision to start rebuilding its crude reserves have also helped oil to a third day of gains.
US crude for February delivery soared to an early high of $48.68 a barrel - the highest level since December 15 - before paring gains on profit-taking. Prices were up 10 cents at $46.44 a barrel at 0931 GMT.
London Brent was down one cent at $46.90.
Oil prices have risen by more than 25 per cent since Israel launched its offensive with aerial bombardments on December 27.
"The market is pausing for breath after big gains over the past week - there's some mild profit-taking after the surge this morning," said ANZ Bank senior commodity strategist Mark Pervan.
Israeli forces yesterday pressed on with a ground, sea and air assault against Hamas in the Gaza Strip that has cut the territory in two, while France spearheaded diplomatic efforts to obtain a truce.
The Gaza violence does not directly threaten any oil supplies, but traders said there was underlying concern it could affect other countries in the Middle East, the origin of a third of the world's crude, with fourth-largest oil producer and Opec member Iran typically the most vocal.
An Iranian military commander has called on Islamic countries to cut oil exports to Israel's supporters in response to the offensive in Gaza, the official IRNA news agency reported on Sunday.
"Sabre rattling by Iran and further instability in the Middle East always produces fears for oil supplies, which is putting a platform under prices," said Bank of Ireland analyst Paul Harris.
On the demand side, the US Energy Department is looking to buy about 12 million barrels of oil for the Strategic Petroleum Reserve in the first four months of the year, to replace supplies sold following hurricanes Katrina and Rita in 2005. It would further boost the reserve through 2009.
The announcement came after China, the world's second-largest oil consumer after the US, said earlier last week it would take advantage of lower crude prices to boost imports and build up reserves.
Weekly inventory data from the US Energy Information Administration (EIA) tomorrow could reflect lower crude stocks after heavy fog closed several ports along the US Gulf Coast.
"The weekly inventory data from the US Department of Energy will be key - there's potential for that to be price supportive," Pervan at ANZ Bank added.
Adding to geopolitical concerns, Russian natural gas supplies to southeast Europe have been reduced as a result of the country's standoff with Ukraine over gas prices, which began on New Year's day. The two sides blame each other for the dispute.
European energy firms, which receive about a fifth of their gas via pipelines through Ukraine, said they had enough gas stockpiled to maintain supplies for several days, but analysts said Europe could face problems if the row dragged on.
The gas row, which recalls a similar dispute three years ago that also disrupted supplies, is likely to raise new questions in Europe about Russia's reliability as a gas supplier.
The market will also be looking for further signs of Opec production cuts, after Libya and Abu Dhabi National Oil Co (Adnoc) both joined leading producer Saudi Arabia, vowing to cut output by January as Opec trys to stem the 54 per cent fall in oil prices in 2008.
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