* Israel's offensive in the Gaza Strip raises tensions
* Russia/Ukraine gas dispute drags on
* Dollar rally cools commodity gains
(Updates throughout)
By David Sheppard
LONDON, Jan 5 (Reuters) - Oil prices fluctuated around $47 a
barrel on Monday after hitting a three-week high early in the
session, as Israel's deepening incursion into Gaza and the
Russian gas dispute heightened geopolitical supply fears.
However, prices swung in and out of positive territory as a
rally in the U.S. dollar encouraged profit-taking by investors,
with oil prices up by more than 30 percent since the end of
December.
U.S. crude for February delivery hit an early high of $48.68
a barrel -- the highest since December 15. Prices were up $1.05
at $47.39 a barrel by 1536 GMT.
London Brent was up 79 cents at $47.70 a barrel.
Oil prices have risen sharply from around $35 a barrel since
Israel launched its Gaza offensive on Dec. 27, heightening fears
for 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.
[]
However an OPEC source told Reuters that 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 neighbours
Kuwait, the United Arab Emirates and Qatar are regional allies
of the United States.
Analysts said, however, that heightened tensions in the
Middle East -- origin of a third of the world's crude -- would
remain supportive of oil prices.
"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.
The Gaza violence does not directly threaten any oil
production, but traders said there was underlying concern it
could affect other countries in the Middle East, with little
sign of the violence abating. []
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 support oil prices in
recent days.
A rally in the U.S. dollar on Monday helped to cool price
gains, analysts said, as dollar-priced commodities such as oil
become more expensive for holders of alternative currencies.
[]
RUSSIAN GAS
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 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 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.
(Additional reporting by Jennifer Tan and Jonathan Leff in
Singapore; Editing by Peter Blackburn)
