Oil Reverses Course, Rises Above $46

Oil prices rose more than 3 percent Friday in thin post-holiday trade as U.S. stocks extended a rally to a two-week high, fighting intensified in Gaza and the Russia-Ukraine gas dispute continued.

U.S. light, sweet crude jumped to around $46 a barrel, having earlier touched a low of $41.05.

London Brent rose as well.

OPEC has committed to a 2.2-million-barrel-per-day cut to be implemented by Jan 1. to help stem the tumble from the record $147 oil price seen in July last year.

"The OPEC cut and Saudi resolve may have put a bottom in.

But this Russia-Ukraine thing is definitely a concern to European supplies," said Tom Bentz at BNP Paribas Commodity Futures.

Oil markets have been watching the dispute between the world's biggest non-OPEC oil exporter, Russia, and its neighbors over natural gas supplies.

Russia shut off gas to its neighbor Ukraine on Thursday, after a contract dispute, but said it had increased supplies to other European states to try to reassure its premium-paying customers.

Fighting continued in the Middle East between Israel and Hamas, with Palestinian Islamists vowing to avenge the death of a senior Hamas leader. The market is watching closely to see if the fighting spreads to other areas of the Middle East.

U.S. stocks started 2009 by extending their recent rally to a two-week high Friday on hopes that the worst of the market rout was over.

In addition, fog closed the ship channel to the refining and petrochemical center at Lake Charles, La., Friday, stalling four inbound vessels, the U.S. Coast Guard said.

Oil prices fell 54 percent as a whole in 2008, from $95.98 to $44.60 a barrel at the close Dec. 31, with the spike to $147.27 set on July 11 in between. As demand dissolved in the wake of a global economic recession, prices were hammered in the closing months of the year.

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On the last trading day of 2008, prices surged 14 percent after weekly U.S. data showed a decrease in refinery activity and an unexpected 500,000-barrel rise in crude stocks in the world's biggest oil consumer.

Refined product inventories also rose, though less than analysts expected. Gasoline stockpiles were up 800,000 barrels, versus a forecast of 1.5 million barrels, while distillates rose by 700,000 barrels, versus an expected 1.1 million barrels.

"The recent crop of demand-side indications for oil has been rather ambiguous. In itself, that is something of a change, given a fairly long period during which the demand side numbers have been weakening fairly consistently," Barclay's Capital wrote in a note to investors.

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