Crude Oil Advances on Gaza Attacks, Russia’s Gas-Shipment Cut

Crude oil rose in New York for a second day as the conflict in Gaza raised concern that Middle East supplies would be cut and Russia curbed natural-gas shipments to Ukraine.

Israeli warplanes conducted fresh attacks against Hamas on the seventh day of a bombing campaign in the Gaza Strip, raising the prospect of violence in the Middle East, source of one-third of the world’s oil. Russia’s dispute with Ukraine over natural- gas prices deepened today and no new talks are scheduled. Oil futures have traded in a range of more than $5 a barrel today.

“A lot of the volatility we are seeing is a result of the wild geopolitical news,” said Michael Lynch, president of Strategic Energy & Economic Research, in Winchester, Massachusetts. “The news from Gaza and Ukraine scares some people and not others.”

Crude oil for February delivery rose $1.58, or 3.5 percent, to $46.18 a barrel at 11:43 a.m. on the New York Mercantile Exchange. Oil dropped 54 percent last year, the first annual decline since 2001 when crude slipped 26 percent, and the biggest loss since trading began in 1983.

OAO Gazprom boosted gas supplies to Europe through Belarus, avoiding Ukrainian pipelines. Talks between the two sides on the price of gas deliveries to Ukraine for 2009 and transit fees for Russian gas to Europe through the country broke down on Dec. 31, and Gazprom cut supplies of the fuel to Ukraine yesterday.

Stocks Rally

Agricultural futures also rose and equities rallied on speculation that government stimulus efforts will curtail the recession. The Dow Jones Industrial Average increased 49.78 points, 0.6 percent, to 8,826.17. The Standard & Poor’s 500 Index rose 0.4 percent to 906.87.

“Equities and commodities are tracking each other,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “The outsized moves we are seeing are in part due to very thin trading volume.”

Oil prices may be more volatile this week because many traders are taking time off for the New Year’s holiday.

Brent crude oil for February settlement climbed $1.16, or 2.5 percent, to $46.75 a barrel on London’s ICE Futures Europe exchange.