* Israel's offensive in the Gaza Strip raises tensions
* Russia/Ukraine gas dispute drags on
(Updates prices with U.S. settlement)
NEW YORK, Jan 5 (Reuters) - Oil prices rose 5 percent on
Monday as Israel's deepening incursion into Gaza and a dispute
between Russia and Ukraine over natural gas heightened fears of
supply disruptions.
U.S. crude <CLc1> gained $2.47 to settle at $48.81 a barrel
after touching a three-week high of $49.28. London Brent
<LCOc1> rose $2.40 to $49.31 a barrel.
Oil prices have risen from around $35 a barrel since Israel
launched its Gaza offensive on Dec. 27, heightening fears of
possible disruptions of crude supplies from the Middle East.
An Iranian military commander called for Islamic producers
to cut supplies to Israel's supporters in Europe and the United
States, the official IRNA news agency reported on Sunday.
But an OPEC source told Reuters the Iranian comments would
not sway other members of the Organization of the Petroleum
Exporting Countries.
"There are no plans to do this and I think it is very
unlikely," the OPEC source told Reuters on Monday.
OPEC's most influential member, Saudi Arabia, and its
neighbors Kuwait, the United Arab Emirates and Qatar, are
regional allies of the United States.
But analysts said heightened tensions in the Middle East --
origin of a third of the world's crude -- would remain
supportive of oil prices.
"Saber 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.
Mounting evidence of OPEC's compliance with production
cuts, and the U.S. Energy Department's decision to start
rebuilding its crude reserves, also have supported oil prices.
Oil remains down nearly $100 a barrel from its peak in July
as global economic turmoil cuts into fuel demand.
RUSSIAN GAS
Adding to geopolitical concerns, Russian natural gas
supplies to southeast Europe have declined as a result of
Russia's stand-off with Ukraine over prices, which began on New
Year's day. The two sides blame each other for the dispute.
European energy companies, which receive about a fifth of
their gas via pipelines through Ukraine, said they had
stockpiled enough gas for several days, but analysts predicted
problems if the dispute persisted.
The row, which recalls a similar dispute three years ago
that disrupted supplies, was likely to raise new questions in
Europe about Russia's reliability as a gas supplier.
The market also will look for further signs of OPEC
production cuts, after Libya and Abu Dhabi's National Oil Co
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 Monday that
was unlikely.
Monday's gains were tempered by an uptick in the value of
the U.S. dollar against other currencies.
(Reporting by Richard Valdmanis in New York, David Sheppard
in London, Jennifer Tan and Jonathan Leff in Singapore; Editing
by David Gregorio)
