Oil jumped to a three week high on Monday after an Iranian military commander called for an oil boycott over Israel's offensive in the Gaza Strip, and as the Russian gas export row stoked fears for European energy supplies.
An OPEC source told Reuters that the Iranian call would not sway other members of the Organization of the Petroleum Exporting Countries.
A strong start to the new year for stock markets, mounting evidence of OPEC's compliance with production cuts, and the US Energy Department's decision to start rebuilding its crude reserves have also helped oil to a third day of gains.
Oil prices have risen by more than 25% since Israel launched its Gaza offensive on December 27.
US crude for February delivery rose to an early high of $48.68 a barrel on Monday - the highest since December 15 - before paring gains on profit-taking. The price was up $1.07 at $47.41 a barrel.
London Brent was up $1.17 at $48.08.
“Sabre rattling by Iran and further instability in the Middle East always produces fears for oil supplies, which is putting a platform under prices,” said Bank of Ireland analyst Paul Harris.
The Gaza violence does not directly threaten any oil supplies, but traders said there was underlying concern it could affect other countries in the Middle East, the origin of a third of the world's crude, with No. 4 oil producer and OPEC member Iran typically the most vocal.
An Iranian military commander has called on Islamic countries to cut oil exports to Israel's supporters in Europe and the United States in response to the offensive in Gaza, the official IRNA news agency reported on Sunday.
However, core OPEC oil producers in the Gulf were likely to ignore Iran's call, an OPEC source said on Monday.
“There are no plans to do this and I think it is very unlikely,” the source told Reuters.
OPEC's most influential member Saudi Arabia and neighbors Kuwait, the United Arab Emirates and Qatar are regional allies to the United States.
Adding to geopolitical concerns, Russian natural gas supplies to southeast Europe have been reduced 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 receive 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 row, which recalls 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.
The market will also be looking for further signs of OPEC production cuts, after Libya and Abu Dhabi's National Oil Co both joined leading producer Saudi Arabia, vowing to cut output by January as OPEC tries to stem the $100 a barrel drop in oil prices since July 2008.
Senior OPEC officials have suggested the producer group could meet in mid-January or February to review the oil market's performance after announcing steep production cuts last month, although an OPEC source told Reuters on Monday that was unlikely. (Reuters)