Oil gained after thousands of Israeli troops crossed the border on Jan. 3 to capture bases that Hamas militants have used to launch rocket attacks on the country. Saudi Arabia, which last month announced with fellow OPEC members the group’s biggest ever production cut, raised the price of all the crude types it exports to the U.S.
Crude oil for February delivery rose as much as $2.34, or 5.1 percent, to $48.68 a barrel in electronic trading on the New York Mercantile Exchange. It was at $46.82 a barrel at 12:05 p.m. London time.
Prices climbed 23 percent last week, the most since August 1986, buoyed by the Gaza conflict, a natural gas dispute between Russia and Ukraine, and a rebound in equity prices. Oil tumbled 27 percent the week before.
The Middle East accounts for almost a third of the world’s oil production. Prices jumped to a then-record $78.40 a barrel in July 2006 after Israel attacked Iranian-backed Hezbollah forces in Lebanon. Iran is the fourth-largest oil producer.
Saudi Aramco, the world’s largest state-owned oil company, raised the official selling prices for shipments of so-called heavy crude grades to be exported in February, according to a company fax.
French President Nicolas Sarkozy arrives in Israel today to meet with Prime Minister Ehud Olmert in Jerusalem and Palestinian Authority President Mahmoud Abbas in Ramallah, in an attempt to push for a cease-fire.
Israel has resisted international calls for a halt in hostilities, saying it needs to shut down the military wing of Hamas. The Islamic group refused to renew a six-month cease-fire that expired on Dec. 19, citing Israel’s economic blockade of the province.
Oil fell 54 percent last year, the first annual drop since 2001 and the biggest loss since trading started. Prices reached a five-year low of $32.40 a barrel on Dec. 19.
Crude oil in New York is trading at a discount to Brent as a result of a surge in inventories at Cushing, Oklahoma, said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. Storage tanks near the town are the delivery point for futures contracts on the New York Mercantile Exchange.
Cushing supplies in the week ended Dec. 26 were at 28.1 million barrels, said the U.S. Energy Department on Dec. 31. That’s slightly down from 28.6 million barrels in the previous week, the most the Department has ever reported.
The surplus of crude may exacerbate the so-called contango structure in oil prices, where futures for prompt delivery are cheaper than those for later, he said.