Oil steady above $48 on MidEast, Russian tensions

                                
 * Israel deepens incursion into Gaza Strip
                                
 * Signs of supply disruptions emerge from Russian gas row
                                
 * U.S. weekly inventory data to show higher crude stocks
                                
 By Jennifer Tan
                                
 SINGAPORE, Jan 6 (Reuters) - Oil was steady above $48 on
Tuesday after rising 5 percent overnight, as Israel's deepening
incursion into Gaza and a spat between Russia and Ukraine over
gas prices stoked fears of severe supply disruptions.
                                
 Oil prices have risen about 50 percent since the intraday
low of $32.40 reached on Dec. 19, also boosted by mounting
evidence of OPEC's compliance with production cuts.
                                
 U.S. crude for February delivery <CLc1> was down 11 cents a
barrel at $48.70 by 0245 GMT, after hitting a three-week high
of $49.28 on Monday.
                                
 London Brent was down 10 cents at $49.52.
                                
 "I would expect choppy, sideways trading for oil prices,
largely because of the Russian gas row and the Gaza conflict,
and until a clearer picture on the economy and supply-side
issues emerges," said Tony Nunan, risk management executive at
Tokyo-based Mitsubishi Corp.
                                
 Israeli troops backed by air strikes fought to seize ground
from Hamas militants deep inside Gaza on Monday, despite
international calls for a ceasefire in a conflict that has
killed more than 540 Palestinians in 10 days. [ID:nL5700436]
                                
 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.
                                
 Adding to geopolitical concerns, Russia reduced gas flows
to Europe via Ukraine on Monday, a measure it said was to stop
its neighbour siphoning off fuel, but which Kiev said could
jeopardise supplies to European countries including Germany.
                                
 Countries in southern and eastern Europe reported new falls
in gas supplies from Russia as the pricing row with Ukraine
escalated, while Serbia and Bulgaria urged industry to scale
back demand and switch to alternative fuels, the first sign
supply disruptions were hitting customers. [ID:nL513944]
                                
 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.
                                
 Weekly inventory data from the U.S. Energy Information
Administration due on Wednesday are forecast to show that
supplies of crude, distillates and gasoline rose last week
[EIA/S], which could be a dampener on the market.
                                
 "The demand situation still looks bad, because the real
economy is getting worse, not better, and I think we could
re-test the lows of $32 again when the February contract goes
off the board later this month," said Nunan.
                                
 The market saw further signs of OPEC production cuts, after
Kuwait notified at least two Asian lifters that it will cut
term crude oil supplies loading from Jan. 22 by 5 percent.
[ID:nT5886]
                                
 The measures add to growing evidence that OPEC's biggest
members are visibly tightening the taps after the cartel agreed
last month to its biggest ever production cut of 2.2 million
bpd.
 (Editing by Michael Urquhart)
 (jennifer.tan@thomsonreuters.com; +65-6417 4679; Reuters
Messaging: jennifer.tan.reuters.com@reuters.net)