Oil rises above $48 amid conflict
Energy group says there is more to rise in prices than Mideast unrest

BY THE ASSOCIATED PRESS Comments 0
Published: January 6, 2009

SIOUX FALLS, S.D. — Israel’s ground offensive in Gaza and a dispute between Ukraine and Russia over gas imports pushed oil prices to more than $48 a barrel Monday, but some analysts say there’s more than unrest in the Middle East behind the rally.

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Light, sweet crude for February delivery rose $2.47 cents to settle at $48.81 a barrel on the New York Mercantile Exchange.

Israel seized control of high-rise buildings and attacked houses, mosques and smuggling tunnels as it pressed its offensive against the Gaza Strip’s Hamas rulers, while the U.S. joined a number of countries calling for a cease-fire.

Energy consultancy Cameron Hanover said some traders like to point to violence in the Middle East as a cause of higher oil prices, but the reality is slightly different.

"Any time that prices react by moving higher in response to violence in the Middle East, particularly in non-oil-producing countries like Israel or the Palestinian territories next door, it is a good sign that the market wants to move higher,” the firm said in its Daily Energy Hedger report.

A mood change

Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, said there seems to be a mood change in the market and a belief that the economic doom and gloom has hit bottom.

"Would we really be concerned about these geopolitical issues as it relates to oil if we didn’t think that the demand was going to improve somewhat in the coming year? Probably not,” Flynn said.

Meanwhile Russian gas monopoly Gazprom has cut off gas shipments to Ukraine since Thursday in a dispute over payments, and Ukraine warned that European customers could see serious natural gas disruptions in about two weeks.

In other Nymex trading, natural gas for February delivery rose 10.1 cents to settle at $6.072 per 1,000 cubic feet.