(Recasts with price updates, quote)
By Jennifer Tan
SINGAPORE, Jan 5 (Reuters) - Oil prices rose nearly 2
percent on Monday after an Iranian military commander
reportedly called for an oil boycott over Israel's offensive in
the Gaza Strip, and on concerns over the deepening Russian gas
supply row.
Wall Street's strong start to the new year on Friday,
mounting evidence of OPEC's compliance with deep production
cuts and the U.S. Energy Department's decision to start
rebuilding its emergency crude reserves have also helped oil to
a third day of strong gains.
U.S. crude for February delivery <CLG9> was up 86 cents a
barrel at $47.20 by 0255 GMT, but off an earlier high of
$48.68.
London Brent <LCOc1> was up 61 cents to $47.52.
"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 troops and tanks split the Gaza Strip and ringed
its main city on Sunday in an offensive against Hamas that has
killed 500 Palestinians, including a growing number of
civilians. []
While the violence does not directly threaten any oil
supplies, the risk is it could engulf other Middle East
countries that produce a third of the world's crude, with No. 4
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. []
"The Gaza conflict added to the geo-political risk
premium... in the oil price," Commonwealth Bank of Australia
analyst David Moore said in a note.
On the demand side, the U.S. 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 comes after China, the world's
second-largest oil user after the U.S., said earlier last week
it would take advantage of lower crude prices to boost imports
and build up reserves. []
Weekly inventory data from the U.S. Energy Information
Administration (EIA) on Wednesday could reflect lower crude
stocks after heavy fog closed several ports along the U.S. Gulf
Coast. []
"The weekly inventory data from the U.S. Department of
Energy out later this week will be key -- there's potential for
that to be price supportive," Pervan said.
Adding to geopolitical concerns, Russian natural gas
supplies fell by five percent to the Czech Republic as a result
of Russia's stand-off 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 received 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 mirrors 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's National Oil Co
both joined leading producer Saudi Arabia, vowing to cut output
by January as OPEC vows to stem the 54 percent fall in oil
prices in 2008.
(Additional reporting by Jonathan Leff; Editing by Michael
Urquhart)
(jennifer.tan@thomsonreuters.com; +65-6417 4679; Reuters
Messaging: jennifer.tan.reuters.com@reuters.net)
