Jan. 6 (Bloomberg) -- Crude oil rose above $50 a barrel to a five-week high as Kuwait and Qatar indicated they will implement supply cuts announced by OPEC last month, and a dispute between Russia and Ukraine reduced natural gas shipments to Europe.

Kuwait and Qatar plan to curtail oil shipments to Asia starting in January, refinery officials in the region said today, after OPEC agreed on a record output reduction on Dec. 17. OAO Gazprom cut gas deliveries to Europe through Ukraine to less than one-third of normal, a NAK Naftogaz Ukrainy spokesman said.

“The OPEC production cuts really are material and there’s not that much of a risk that either compliance is so poor that the cuts don’t turn out to be substantial or that they make the cuts but they’re still not enough to raise prices,” said Tim Evans, energy analyst with Citi Futures Perspective in New York.

Oil for February delivery rose 34 cents, or 0.7 percent, to $49.15 a barrel at 11:50 a.m. on the New York Mercantile Exchange. Earlier, it touched $50.47, the highest since Dec. 1.

Russia and Ukraine blamed each other for the cuts as gas shipments from OAO Gazprom through Ukraine plummeted and deliveries to the Balkans were halted. The conflict caused U.K. gas prices to jump as much as 27 percent. NAK Naftogaz Ukrainy Chief Executive Officer Oleh Dubina said he would return to Moscow on Jan. 8 to resume talks.

“Russia continues to play hardball with Ukraine on the natural gas contract,” said Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Switzerland. “If a solution for a return to normality is not found very quickly, this should result in incremental demand on fuel oil, naphtha, heating oil to substitute for the missing natural gas.”

Gasoil Rally

Limited natural-gas supplies to eastern and central Europe from Russia helped fuel a rally to a five-week high in gasoil prices as temperatures across Europe plummeted to below freezing. Gasoil is the common name for heating oil outside North America.

Gasoil for immediate loading in the Amsterdam-Rotterdam- Antwerp area, Europe’s oil-trading hub, rose $46.25, or 10 percent, to $520.25 a metric ton at 2:32 p.m. London time, according to data compiled by Bloomberg. That’s the highest since Nov. 28. Heating oil in the U.S., where temperatures are forecast to drop in the Northeast, rose as much as 5.9 percent.

Brent crude oil for February settlement added $1.35, or 2.7 percent, to $50.97 a barrel on London’s ICE Futures Europe exchange. It touched $52.21, also the highest since Dec. 1. Brent rose more than U.S. futures partly because of the gasoil rally.

The conflict between Russia and Ukraine “really reinforces this notion that the West needs to be concerned about the security of energy supplies coming from Russia,” said Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut.

Gaza Conflict

Oil also advanced as the conflict between the Israeli army and Hamas reached its 11th day with battles in the Gaza Strip. Iran, the second-largest producer in OPEC and a Hamas supporter, has called for a suspension of crude exports to allies of Israel.

The Organization of Petroleum Exporting Countries decided to cut production by 4.2 million barrels a day from September levels at a Dec. 17 meeting in Algeria in response to tumbling prices, which last year had a record drop of 54 percent.

Kuwait, OPEC’s third-largest producer in November, will reduce shipments of oil sold under long-term contracts by 5 percent starting Jan. 22, said refinery officials. Qatar, the group’s second-smallest producer, will slash cargoes by as much as 6 percent in February, compared with 5 percent in January.

The U.S. Energy Department is scheduled to release its weekly report on inventories of crude oil and fuels at 10:30 a.m. tomorrow in Washington.

U.S. crude stockpiles probably increased 1 million barrels in the week ended Jan. 2, from 318.7 million the week before, according to the median of seven analyst estimates.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

Last Updated: January 6, 2009 12:08 EST