Oil Prices Skyrocket Overnight

World oil prices surged to the highest levels in almost three months after Russia's energy row with neighbour Ukraine disrupted gas supplies across Europe, hit also by cold weather.

New York's main contract, light sweet crude for delivery in February, rocketed $US1.96 to $US63 per barrel in pit deals, compared with Friday's close before the long New Year holiday weekend.

At one point overnight, the contract hit $US63.30, the highest point since October 18. In London, the price of Brent North Sea crude for February delivery soared $US2.27 to $US61.25 per barrel in electronic dealings, compared with Friday's close. It peaked at $US61.53 on Tuesday, the highest level since October 5.

The Russia-Ukraine dispute "has served to emphasise the dependence of Western Europe on Russian gas supplies and the issue has the potential to keep European gas consumers on edge for some time", Barclays Capital analyst Kevin Norrish said.

On Tuesday, Russia was restoring gas supplies to European nations after key markets felt the squeeze from an ongoing price war with Kiev. "The work of restoring supplies is almost finished and Gazprom fulfills all its obligations to European consumers," said Sergei Kupriyanov, official spokesman for the Russian state-controlled energy firm.

The row erupted when Gazprom, which controls a third of global natural gas reserves, demanded an immediate rise in Soviet-era gas tariffs to Ukraine. Supplies were cut on Sunday after Kiev rejected the price hike, in turn affecting Europe which imports a fifth of its natural gas from Russia via Ukraine.

Russian and Ukrainian energy officials said that executives from Ukraine's state-owned Naftogaz energy company would travel to Moscow on Tuesday for talks to resolve the crisis between the neighbouring countries.

Elsewhere, oil prices were being supported by colder weather in Europe, Investec analyst Bruce Evers said. "It is very cold in Europe," he said. "The US is still quite mild but northern Europe is very cold."

Crude futures began trading in 2006 after hitting historic high points in 2005. Following the devastation wrought by Hurricane Katrina on US Gulf Coast energy installations, prices struck $US70.85 per barrel in New York and $US68.89 in London in late August.

That marked a 70 per cent jump between January and August last year, but prices later pulled back owing largely to mild weather across the northern hemisphere in the run-up to winter.