| GEO Business|
| Gaza tensions push oil prices above 40 dollars|
| Updated at: 0205 PST, Tuesday, December 30, 2008|
NEW YORK: Oil prices breached 40 dollars a barrel Monday on rising unrest in the Middle East, bargain hunting and evidence that OPEC members have begun complying with agreed output cuts, traders said.
New York's main contract, light sweet crude for February delivery, rose 2.31 dollars from Friday's close to end at 40.02 dollars.
In London, Brent North Sea crude for delivery in February was up 2.18 dollars to 40.55 dollars a barrel on the InterContinental Exchange after earlier rocketing almost five dollars.
Prices rose as Israeli warplanes pounded Gaza for a third day Monday in an "all-out" war on Hamas that has killed at least 345 people and prompted rocket fire from the Palestinian enclave.
The fighting fueled fears of wider tensions in the oil-rich Middle East, traders said. Thin trade owing to the year-end holiday season also made for some price volatility.
"Military action by Israel is always a grave concern because of the uncertainty of where it might lead," said Mike Fitzpatrick of MF Global.
"The region has been, and remains, a tinderbox and so it has the ability to erupt into a conflagration that could involve oil supplies," he said.
But while oil prices remained sensitive to geopolitical developments, especially in the Middle East, he cited "the declining dollar, low volume and the return of bargain hunting Europeans" as other factors driving the market.
Traders were also monitoring a Gulf Cooperation Council (GCC) leaders meeting in Oman at which the Gaza turmoil was expected to dominate the talks among Saudi Arabia, the United Arab Emirates, Oman, Qatar, Bahrain and Kuwait, which together sit on 45 percent of global oil reserves.