UPDATE 11-Oil falls from 32-month high on demand concerns

                                
 * Goldman sees risk oil prices could fall
                                
 * African plan fails to halt Libya fighting
                                
 * U.S. gasoline prices rose 11c/gallon last week - EIA
                                
 * Coming up:MasterCard fuel demand data 2 p.m. EDT Tues
 (Recasts, updates with analyst quote, EIA fuel price data)
                                
 By Robert Gibbons
                                
 NEW YORK, April 11 (Reuters) - Oil dropped nearly 3 percent
on Monday, falling from 32-month highs as concerns that rising
fuel costs will erode demand and threaten the economic recovery
spurred profit-taking.
                                
 In early activity, Brent crude extended its rally to top
$127 a barrel and U.S. crude reached $113 due to ongoing
concerns about unrest in Libya.
                                
 When crude turned negative, analysts and brokers cited
technicals indicating it had become overbought in recent
sessions, as well as a client recommendation from Goldman Sachs
warning it saw a strong chance commodity prices may reverse and
saying they should take profits. [ID:nN11303064]
                                
 Goldman noted "nascent signs of oil demand destruction in
the United States" that could drag prices down, as well as the
possibility of a Libya ceasefire. The bank also said Nigeria's
elections, which had added further risk to oil markets, had
thus far not caused supply disruptions. [ID:nN11303064]
                                
 Brent crude for May <LCOc1> fell $2.67 to settle at $123.62
a barrel after reaching a 32-month peak of $127.02. Brent
slumped as low as $123 in post-settlement trading.
                                
 U.S. crude <CLc1> fell $2.87 to settle at $109.92, pulling
back after reaching an early $113.46 peak, the highest intraday
price since September 2008. U.S. crude fell more than $4 to
$108.68 in post-settlement trading.
                                
 "Technicals indicated crude was overbought, with RSI
(relative strength index) for both Brent and WTI over 70 this
morning," said Richard Ilczyszyn, senior market strategist at
Lind-Waldock in Chicago.
                                
 The 14-day RSI, a measure of whether a contract is
overbought or oversold, approached 80 on Friday for Brent,
according to Reuters data, before dipping below 70 on Monday.
[ID:nN08204539] A reading above 70 is considered overbought,
while anything under 30 is oversold.
                                
 "We feel that the sell-off simply represented a deserved
price correction following this month's upside acceleration,"
Jim Ritterbusch, president at Ritterbusch & Associates in
Galena, Illinois, said in a note.
                                
 Oil has rallied in recent weeks as unrest in Libya has cut
supplies from the OPEC member. An African bid to halt Libya's
civil war collapsed on Monday after Muammar Gaddafi's forces
shelled a besieged city and rebels said there could be no deal
unless he was toppled. [ID:nLDE7390JP]
                                
 With Libyan production curbed sharply, Saudi Arabia has
raised output. A senior Gulf source dismissed doubts among
analysts about Saudi Arabia's claimed 12.5 million barrels per
day capacity, saying such doubts were the work of speculators
trying to manipulate oil prices. [ID:nLDE7390C0]
                                
 PRICE THREAT TO DEMAND
                                
 Concerns that rising gasoline prices could curb driving
weighed on the market, with the U.S. Energy Information
Administration reporting an 11 cent jump last week to an
average $3.79 a gallon in pump prices across the country.
                                
 The average diesel fuel price jumped 10 cents to $4.08 a
gallon, topping $4 for the first time since September 2008, the
EIA said. [ID:nN1182424]
                                
 The International Monetary Fund warned in its World
Economic Outlook that soaring oil prices and inflation in
emerging economies pose risks to the world economy but are not
yet strong enough to derail it. [ID:nLDE73A1OT]
                                
 Demand concerns also remain for No. 3 oil consumer Japan,
where the evacuation zone around its damaged nuclear plant was
expanded because of high levels of accumulated radiation, as a
strong aftershock rattled the area. [ID:nLDE73A126]
                                
 Weekly oil inventory reports will offer a fresh snapshot of
U.S. demand and stockpiles. Analysts surveyed on Monday
expected crude stocks to have risen last week, with distillate
stocks dipping and gasoline stocks dropping. [EIA/S]
                                
 Oil data from industry group the American Petroleum
Institute is due at 4:30 p.m. EDT (2030 GMT) on Tuesday.
                                
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 Libya graphics  http://link.reuters.com/neg68r
                                
 Interactive graphic http://link.reuters.com/puk87r
                                
 Reuters Insider-Doomsday Scenarios for Oil:
                                
 http://link.reuters.com/ner88r
                                
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 (Additional reporting by Gene Ramos in New York, Claire
Milhench in London and Florence Tan in Singapore; Editing by
Dale Hudson and David Gregorio)