World oil prices edged toward $79 today as traders expected that cold weather in the US would further strengthen demand for heating fuel.
New York's main futures contract, light sweet crude for delivery in February, rose seven cents to $78.84 a barrel. Brent North Sea crude for February delivery gained 32 cents to $77.64 a barrel.
The market won further support from geopolitical tensions sparked by the crackdown on protests by major crude producer Iran, and from the oil transit dispute between Russia and Ukraine.
Oil prices had jumped last week as a larger than expected drop in US energy stockpiles had sparked hopes of rising demand, traders said.
Data released by the US Department of Energy last Wednesday had showed US crude stockpiles dropping 4.9 million barrels to 327.5 million in the week ending December 18.
Meanwhile, Russia and Ukraine agreed new terms for oil transit to Europe, averting the threat of another year-end energy crisis after Prime Minister Vladimir Putin accused Kiev of 'abuse' on the deal.
A spokeswoman for the Russian energy ministry in Moscow confirmed that a new agreement had been concluded but declined to provide details. Officials in both countries said the agreement only covered 2010.
The agreement came a day after the EU announced that Russia had triggered an 'early warning mechanism' advising European states of the possibility of disruption to Russian oil supply pumped via Ukraine.
The Ukrainian state oil pipeline monopoly, which is owned by Naftogaz, acknowledged on Monday that it was seeking changes to terms of its 2004 oil transit contract with Russia.
Confirmation by both sides that a new agreement had been reached however put to rest fears of another possible disruption of Russian energy supplies to EU states.
A dispute between Russia and Ukraine on natural gas prices last year led to a cutoff of Russian gas supplies to Europe and severe shortages in some countries amidst freezing winter weather.
