* Iranian military commander calls for oil boycott
* Israel's offensive in the Gaza Strip raises tensions
* U.S. looks to buy 12 million barrels for reserve
(Updates prices, adds comment, PVS SINGAPORE)
By David Sheppard
LONDON, Jan 5 (Reuters) - Oil prices jumped to a three week
high on Monday 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 OPEC's compliance with production cuts, and the U.S.
Energy Department's decision to start rebuilding its crude
reserves have also helped oil to a third day of gains.
U.S. 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 1 cent at $46.90.
Oil prices have risen by more than 25 percent since Israel
launched its offensive with aerial bombardments on Dec. 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 on Monday pressed on with a ground, sea and
air assault against Hamas militants 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 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. []
"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 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 came after China, the world's
second-largest oil consumer 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 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
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 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's National Oil Co
both joined leading producer Saudi Arabia, vowing to cut output
by January as OPEC trys to stem the 54 percent fall in oil
prices in 2008.
(Additional reporting by Jennifer Tan and Jonathan Leff in
Singapore; Editing by William Hardy)
