Oil rises after Israel opens fire in Gaza, fuelling Mideast oil supply concerns

The price of oil rose Wednesday on new concerns about possible supply disruptions in the Middle East after Israel launched airstrikes in Gaza.

Benchmark West Texas Intermediate crude rose 94 cents to finish at US$86.32 a barrel in New York. Brent crude, used to price international varieties of oil, rose $1.14 to US$108.48 a barrel in London.

Israeli leaders said the airstrikes, which killed a Hamas military commander, were the start of a broad operation in response to days of heavy rocket fire from the neighbouring Palestinian territory.

Meanwhile global economic issues and the “fiscal cliff” in the U.S. are still in focus. Unless President Barack Obama and Congress reach a compromise, a series of expiring tax cuts and broad spending cuts will take effect in January, seriously impacting the world’s largest economy.

Elsewhere official figures showed industrial production dropped 2.5 per cent in September in the 17 countries that use the euro as currency. It was the largest monthly decline since January 2009.

Slower economic growth means less demand for energy products such as gasoline, heating oil and natural gas.

“The market is really kind of torn right now on the next direction,” Price Futures Group oil analyst Phil Flynn said. “Everyone is waiting around to see if we’re going to go over the fiscal cliff.”

In other energy futures trading on the New York Mercantile Exchange, heating oil rose 2.74 cents to end at US$2.9882 a U.S. gallon (3.79 litres), gasoline futures rose 2.52 cents to end at US$2.679 a gallon and natural gas rose 2.1 cents to end at $3.76 per 1,000 cubic feet.