World oil prices rose toward 79 dollars on Tuesday as traders expected that freezing weather in the United States would further strengthen demand for heating fuel.
New York's main futures contract, light sweet crude for delivery in February, rose 13 cents to 78.90 dollars a barrel.
Brent North Sea crude for February delivery gained 23 cents to 77.55 dollars per barrel.
The market should also win support from geopolitical tensions sparked by the crackdown on protests by major oil producer Iran and renewed terrorism fears after last week's failed attempt to set off an explosive device aboard a US airliner, analysts said.
"Colder weather in North America, geopolitical concerns over Iran, the latest chapter in the Russo-Ukrainian dispute, as well as expectations of further crude stockdraws in the US may have provided support," said analysts at the JBC Energy consultancy in Vienna.
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.
On Tuesday, meanwhile, Russia and Ukraine signed a new agreement on Russian oil transits via Ukraine to Europe for next year, a spokesman for Ukrainian energy company Naftogaz said.
A spokeswoman for the Russian energy ministry in Moscow confirmed that a new agreement had been settled.
"Yesterday night everything fell into place. An additional agreement has been signed," Naftogaz spokesman Valentyn Zemlyansky told AFP.
Naftogaz owns Ukraine's state pipeline operator UkrTransNafta, which said on Monday it was seeking to change the terms of a 2004 transit contract with Russia for oil shipments to the European Union.
The announcement came hours after Russian Prime Minister Vladimir Putin accused Ukraine of abusing its position as a transit country.
In January 2009, Russia had halted gas supplies transiting through Ukraine over a price dispute for several days, leaving swathes of the EU without heating amid a severe winter.
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