Crude oil futures rose above $48 in New York dealing yesterday, as Israel�s ground offensive in Gaza and a dispute between Ukraine and Russia over gas imports helped fuel a rally in prices.

CRUDE oil futures rose above $48 in New York dealing yesterday, as Israel's ground offensive in Gaza and a dispute between Ukraine and Russia over gas imports helped fuel a rally in prices.

Tensions soared in the Middle East as thousands of Israeli troops backed by tanks and helicopter gunships surrounded Gaza's largest city and fought Hamas militants. The offensive moved from air strikes to artillery shelling and ground fighting in a bid to stop Hamas firing rockets on southern Israel.

An Iranian Revolutionary Guard commander urged Islamic nations to use crude oil as a weapon to exert pressure on Western backers of Israel but the demand drew little support from members of the Opec producers' cartel.

Meanwhile, Russian gas monopoly Gazprom has cut off gas shipments to Ukraine since Thursday in a dispute over payments, and Ukraine has warned that European customers could see serious natural gas disruptions in about two weeks.

US light, sweet crude for February delivery climbed to an early peak of $48.68 a barrel - the highest since December 15. Prices later closed at $48.81 a barrel. The contract rose on Friday by $1.74 to settle at $46.34.

London-traded North Sea Brent was up 79 cents at $47.70 a barrel.

Oil prices have risen sharply from around $35 a barrel since Israel unleashed its Gaza offensive on December 27, heightening fears for crude supplies from the Middle East.

Analysts said, however, that heightened tensions in the Middle East - the region that supplies about a third of the world's crude - would remain supportive of oil prices.

"Sabre-rattling by Iran and further instability in the Middle East always produces fears for oil supplies, which is putting a platform under prices," said Paul Harris, an analyst at Bank of Ireland.

The Gaza violence does not directly threaten any oil production, but traders said there was underlying concern it could affect other countries in the Middle East, with little sign of the violence abating.

Mounting evidence of Opec's compliance with production cuts, and the US Energy Department's decision to start rebuilding its crude reserves have also helped oil to support oil prices in recent days.