Oil rises above $47 on Middle East tension

SINGAPORE: Oil prices rose to above $47 a barrel on Monday in Asia as a ground offensive by Israeli troops against Hamas militants in Gaza heightened tensions in the oil-rich Middle East.

Light, sweet crude for February delivery rose 83 cents to $47.17 a barrel, after earlier jumping to as high as $48.66, in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract rose on Friday %1.74 to settle at $46.34.

Thousands of Israeli troops backed by tanks and helicopter gunships surrounded Gaza's largest city and fought Hamas militants at close range on Sunday, as the offensive moved from air-strikes to artillery shelling and ground fighting in a bid to stop rocket fire on southern Israel.

More than 512 people have died in Gaza while five Israelis have been killed since the offensive began on Dec 27.

"With Israeli troops going into Gaza, that just heightens fears of the possibility of a wider Middle East conflict," said Ken Hasegawa, an energy analyst with broker Newedge in Tokyo. "Prices will likely continue to rise in the short term."

Investors are also keeping close tabs on whether OPEC is following through on announced production cuts. The Organisation of Petroleum Exporting Countries has pledged to reduce output quotas by 4 mn barrels a day since October.

The direction of oil going forward will depend on OPEC's compliance with their output cuts and the health of the global economy," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. Shum expects prices to average in the low $50s this year.