Oil up to US$88 a barrel amid supply fears over Israel-Hamas fighting

The price of oil rose to US$88 a barrel Monday as the conflict in Gaza between Israel and Hamas showed no signs of abating, raising concerns about Middle East crude supplies.

By early afternoon in Europe, benchmark West Texas Intermediate crude for December delivery was up $1.09 to US$88.01 a barrel in electronic trading on the New York Mercantile Exchange. The contract added $1.05 to finish at US$86.92 per barrel on Friday.

Brent crude, used to price many international varieties of oil, rose 77 cents to US$109.72.

Analysts highlighted concerns that oil supplies could be disrupted if the Israel-Hamas conflict engulfs countries elsewhere in the Middle East, a huge producer of crude.

“Fears are growing that Arab oil producers could find themselves dragged into the conflict between Israel and the Palestinians,” said a report from Commerzbank in Frankfurt. “We therefore assume that prices will continue to rise.”

The fighting comes just as winter arrives in the U.S. and China, boosting energy demand.

Meanwhile, expectations that President Barack Obama and U.S. congressional leaders will reach a budget deal by the end of the year and avoid the “fiscal cliff” of big tax increases and spending cuts also bolstered oil prices.

“It seems that risk appetite is back to the energy board, showing a strong rally in crude oil prices following U.S. fiscal hopes,” said analysts at Sucden Financial Research in London.

In other energy futures trading on Nymex, heating oil was up 4.06 cents to US$3.0274 a U.S. gallon (3.79 litres), wholesale gasoline rose 1.19 cents to US$2.7220 a gallon and natural gas added 1.3 cents to $3.803 per 1,000 cubic feet.

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