Oil rises above $40 on Israeli attacks, dollar

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(Agencies)
Updated: 2008-12-29 21:26

LONDON – Oil prices rose above $40 a barrel on Monday, boosted by the weak dollar and violence between Israel and Hamas that served as a reminder of tensions that could threaten crude supplies from the Middle East.

A woman fills petrol into her car at a filling station in Puchheim westward of Munich in this December 12, 2008 file photo. [Agencies]

US light, sweet crude was up $3.08 at $40.79 a barrel by 1143 GMT (6:43 a.m. EST), below a session high of $42.20.

Oil is on track for a nearly 60 percent loss this year, the biggest annual fall since futures began trading 25 years ago.

London Brent crude rose $3.23 to $41.60 a barrel, after touching a session high of $43.18.

"Geopolitics had disappeared from the oil scene for the last couple of months but will regain some price premium with the latest Israeli attack in Gaza," Olivier Jakob, of consultants Petromatrix, said in a research note.

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 and highlighted the risk, however remote, that the conflict could threaten oil supplies from the region.

Gold rose nearly 3 percent to its highest since early October on the weak dollar and after the Middle East violence.

The dollar was down against the euro.

"The level and intensity of violence this time has warranted a fiercer response from the broader Arab world and beyond," said Raja Kiwan of energy consultants PFC Energy.

Kiwan said, however, that the large amount of bearish economic news would ultimately overshadow such geopolitical factors.

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