SINGAPORE (Reuters) - Oil prices rose more than $1 a barrel on Monday after weekend violence flared between Israel and Hamas, reminding traders of the geopolitical risk to crude supplies from the Middle East.
Oil gained for a second day after Friday's surge on the back of growing signs of OPEC compliance with this month's record production cut, although at around $39 a barrel the market remains depressed by fears of a deepening global recession.
U.S. light, sweet crude gained $1.01 to $38.72 a barrel by 2326 GMT, just below an earlier peak of $39.18, while Brent crude rose $1.26 to $39.63 a barrel.
The OPEC reduction is its deepest ever as the producer group battles a market slump that has sliced about $110 off the price since a July peak above $147 a barrel.
"Some news around Israel and Gaza is pushing the market higher," said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.
Israel pounded Hamas targets in the Gaza Strip from the air on Sunday and prepared for a possible invasion after killing at least 297 Palestinians in two days of attacks.
Israel said the campaign that began on Saturday was a response to almost daily rocket and mortar fire that intensified after Hamas, the Islamist group in charge of the enclave that Israel quit in 2005, ended a six-month ceasefire a week ago.
The attacks enraged Arabs across the Middle East raising the risk, however remote, that the conflict could engulf major oil exporters and endanger real supplies.
Hasegawa said he thought that was remote.
"We've seen this kind of case quite often so I think the upside (for oil prices) will be limited. I don't think it is so serious at the moment," he said.
Oil had rallied on Friday, breaking a nine-day losing streak, on news Abu Dhabi National Oil Co, the main producer in the UAE, said it would cut January and February oil exports by much more than some refiners had expected.
The allocations follow a decision two weeks ago by the Organization of the Petroleum Exporting Countries to reduce supplies by 2.2 million barrels per day. Top exporter Saudi Arabia informed its customers of cuts even before the meeting.
(Reporting by Jonathan Leff; Editing by Anshuman Daga)
