NEW YORK (Reuters) – Oil prices rose more than $2 on Monday amid concern that Israeli attacks on Hamas could disrupt Middle East crude oil supplies and as the dollar weakened.
U.S. light, sweet crude settled up $2.31 at $40.02 a barrel, below earlier highs above $42, with thin post-holiday trade making for a volatile day in the market.
London Brent crude settled up $2.18 at $40.55 a barrel, after touching a session high of $43.18.
Oil is on track for a nearly 60 percent loss this year, the biggest annual fall since futures began trading 25 years ago.
Israeli aircraft attacked Hamas targets in Gaza on the third day of an offensive that has killed more than 300 Palestinians, many of them civilians.
The attacks enraged Arabs across the Middle East, raising concerns that the conflict could threaten oil supplies from the region.
"Certainly, oil prices remain sensitive to geopolitical developments, especially those emanating from that part of the world, but the declining dollar, low volume and the return of bargain-hunting Europeans are probably more to blame," Mike Fitzpatrick, vice president at MF Global, said in a report.
The dollar fell broadly on Monday, eroded by a grim outlook for the U.S. economy. Dollar weakness can increase the investment appeal of oil and other commodities.
Economic worries tempered earlier gains for oil, with Wall Street hit by failure of a $17.4 billion joint venture between Kuwait and Dow Chemical, potentially threatening Dow's acquisition of rival Rohm & Haas.
"Equities turned around after crude was up on Gaza, so that was a factor," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.
OPEC COMPLIANCE
Oil is down more than $100 a barrel from a record peak of more than $147 in July, depressed as the downturn in the world economy has hit demand for fuel.
OPEC agreed its biggest ever production cut of 2.2 million barrels per day in December, to fight the market's slide.
Libya and Abu Dhabi's National Oil Co have both joined leading producer Saudi Arabia, vowing to cut output by January.
OPEC has cut output three times in an effort to remove about 5 percent of world supply to halt the slump.
China's energy chief said the world's second-largest oil user after the United States would take advantage of falling oil prices to boost imports and build up its fledgling oil reserves.
A poll of analysts ahead of weekly U.S. government inventory data forecast U.S. crude stocks fell by 1.4 million barrels last week. The analysts predicted 1 million-barrel build in distillate inventories and a 1.5 million-barrel build in gasoline stocks.
http://news.yahoo.com/s/nm/20081229/bs_nm/us_markets_oil
Topic: Oil rises $2 on Israel and weak dollar (Read 1596 times)