Crude oil rose for a second day yesterday after Israeli air-strikes in the Gaza strip raised concerns that supply from the Middle East, the world's largest-producing region, may be disrupted.
Israeli Defense Minister Ehud Barak said Israel is fighting a "war to the death" with Hamas, the group that controls Gaza. The United Arab Emirates announced compliance with OPEC production cuts agreed on this month.
"The instability in the Middle East may well push oil prices higher," Rob Laughlin, a senior broker with MF Global in London, told Bloomberg News.
Crude oil for February delivery rose as much as US$4.49, or 12 percent, to US$42.20 a barrel yesterday in electronic trading on the New York Mercantile Exchange, the biggest gain in a week. It was at US$40.24 at 12:38pm in London. Yesterday's gain pares oil's plunge from its US$147.27 a barrel record on July 11 to 73 percent.
Hamas, the militant Islamist group that took control of Gaza last year, is backed by Iran and considered a terrorist organization by the United States.
Iran holds the world's second-largest oil reserves and sits on the narrow sea channel through which oil from the Persian Gulf is shipped.
Dollar Weakens
Crude was supported yesterday as the US dollar lost more than 2 percent against the euro, its biggest decline in more than a week, bolstering the appeal of dollar-priced assets such as gold and oil used to hedge against inflation.
The US currency traded at US$1.4339 a euro at 11:09am London time.
Abu Dhabi National Oil Co, the United Arab Emirates' state-owned producer, will reduce crude oil exports in January and February after OPEC agreed to lower output as of January 1.
The Organization of Petroleum Exporting Countries, supplier of more than 40 percent of the world's oil, agreed on December 17 to trim daily production targets by 2.46 million barrels next month.
Brent crude oil for February settlement climbed as much as US$4.81, or 13 percent, to US$43.18 a barrel on London's Intercontinental°?Exchange futures market.
Oil prices soared to a then-record US$78.40 a barrel in July 2006 after Israel attacked Iranian-backed Hezbollah forces in Lebanon. At the time, Iran, the fourth-largest oil producer, was facing international sanctions over its nuclear program, while pipeline attacks had also cut output in Nigeria.
(Shanghai Daily December 30, 2008)
