Oil jumped more than 3 per cent on Monday after an Iranian military commander reportedly called for an oil boycott over Israel’s ground 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 and mounting evidence of OPEC’s compliance with deep production cuts also helped oil to a third day of strong gains,driving prices to their highest in over two weeks.
US light,sweet crude for February delivery rose $1.47 a barrel to $47.81 by 2330 GMT,with some traders beginning to reckon that the over $110 slump in prices from their $147 record high last July had been overdone.
“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. “Oil markets may also have a sense that the implementation of earlier announced production cuts by OPEC countries will ultimately tighten oil supplies.”
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.
Israeli tanks poured shells and machinegun-fire into suspected militant positions and war planes struck as Hamas fighters fought back with mortars and rockets.
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.