Oil hit a one-month high above $50 a barrel at midday as Israel's incursion into Gaza and a dispute between Russia and Ukraine over natural gas heightened concern about supply disruptions.
Tension in the Middle East, supply cuts by OPEC oil exporters and the row between Russia and Ukraine have helped to boost crude prices by more than 50 percent from a low of $32.40 on December 19th.
"Oil prices continue to be supported by political issues, whether they be gas or Gaza related," Rob Laughlin, broker at MF Global, said.
US crude for February delivery was up $1.20 at $50.01 by 11.42am and earlier hit $50.10, the highest since December 2nd. London Brent was up $1.76 at $51.38.
The Gaza conflict does not directly threaten any oil supplies, but unrest in the Middle East can bolster prices because countries in the region pump about a third of the world's oil.
Russian gas supplies via Ukraine to the Balkans, Turkey and south-eastern Europe were halted on Tuesday and flows to EU-member state Austria dropped by 90 per cent in a deepening price row between Moscow and Kiev.
The gas row, which echoes a similar dispute three years ago that also disrupted supplies, will renew questions in Europe about Russia's reliability as a gas supplier. Russia is also a major oil exporter.
Oil has fallen steeply from a record high of $147.27 reached in July as the global downturn eroded demand.
Fuel inventories are rising as demand slows. A report from the U.S. Energy Information Administration due on Wednesday is forecast to show that supplies of crude, distillates and gasoline increased last week.
The Organization of the Petroleum Exporting Countries has cut output three times since September in a bid to halt the price decline.
Kuwait will deepen oil supply curbs to its main customers in Asia later this month, refiner sources said today, a measure that adds to evidence OPEC members are tightening the taps.
Reuters