SINGAPORE (Reuters) –
Oil jumped more than 3 percent 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.
U.S. 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.
An Iranian military commander called on Islamic countries to cut oil exports to Israel's supporters in response to the offensive in Gaza, the official IRNA news agency reported.
"Pointing at Westerners' dependence on the Islamic countries' oil and energy resources, he (Bagherzadeh) called for cutting the export of crude oil to the Zionist regime's supporters the world over," IRNA said, referring to Israel.
IRNA gave only the commander's last name but it may have been referring to Mirfeysal Bagherzadeh, a brigadier-general of Iran's elite Revolutionary Guards.
There was no immediate comment from other Iranian officials, and many analysts doubted whether Tehran would be prepared to follow words with action, or whether other countries with closer ties to the West would be willing to follow.
"You would expect hardliners to issue such words but as a practical policy I don't think it would be very effective," independent analyst Mehdi Varzi said.
Adding to geopolitical concerns, Russian natural gas supplies fell by five percent to the Czech Republic as a result of Russia's stand-off with Ukraine over gas prices, which began on New Year's day. The two sides blame each other for the dispute.
European energy firms, which received about a fifth of their gas via pipelines through Ukraine, said they had enough gas stockpiled to maintain supplies for several days, but analysts said Europe could face problems if the row dragged on.
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.
(Reporting by Jonathan Leff; Editing by Anshuman Daga)