* Disruption in Libya has cut more than 25 pct of production
* Analysts eye contagion of unrest in the region, eye on
Saudi
* For a long term technical outlook on oil:
* http://graphics.thomsonreuters.com/WT/20112402104605.jpg
* http://graphics.thomsonreuters.com/WT/20112402111227.jpg
(Updates prices, adds analyst comments)
By Luke Pachymuthu
SINGAPORE, Feb 24 (Reuters) - Oil prices hit a fresh
2-1/2-year peak on Thursday on concern the bloody unrest that
has cut more than a quarter of OPEC-member Libya's crude output
could spread to other major producers, including top exporter
Saudi Arabia.
Disruption stemming from the revolt in the world's No. 12
exporter Libya has cut at least 400,000 barrels per day (bpd) of
the country's 1.6 million bpd output, according to Reuters
calculations.
Brent crude on Thursday touched $113 a barrel for
the first time since Sept. 1, 2008. The contract later trimmed
gains and was up $1.57 at $112.82 a barrel by 0612 GMT.
"I see more upside on Brent for the moment, with prices
likely to hit $120 by the end of March," said Ken Hasegawa, a
commodity derivatives manager at Newedge brokerage in Tokyo.
Reuters market analyst Wang Tao says Brent is likely to rise
to $158 per barrel in 2011, pushing it well above its 2008 high
of $147.50, while he expects U.S. crude to touch $159 per
barrel.
U.S. crude for April delivery rose 86 cents to $98.97
per barrel, after touching $100 for the first time since October
2008 on Wednesday.
The cuts from Libya represent the first disruption to supply
as a direct result of protests that have swept through the oil
producing regions of North Africa and the Middle East.
The concern for oil markets is how unrest might affect Saudi
Arabia, which not only pumps around 10 percent of the world's
oil but is also the only holder of significant spare crude
production capacity that could be used to plug supply outages
such as those being suffered by Libya.
"The situation in the Middle East is causing a lot of
uncertainty in the market now, the risk of disruption to major
producers in the region is what every investor is watching now,"
Hasegawa said.
Without Saudi Arabia's 4 million bpd of spare capacity,
there is little margin in the global oil supply system to deal
with output disruption.
To date, the kingdom has escaped the popular protests
against poverty, corruption and oppression that have raged
across the Arab world, toppling the long-time leaders of Egypt
and Tunisia and spreading as far as Saudi neighbour Bahrain.
"You can't ignore it, if you have trouble in Bahrain, there
is a fear that this could spread into Saudi Arabia," said Tony
Nunan, a risk manager with Tokyo-based Mitsubishi Corp.
"No one expected Egypt's (Hosni) Mubarak to go, now anything
is possible and that is why everyone is watching this closely."
Saudi King Abdullah returned home on Wednesday from a
three-month medical absence and unveiled benefits for Saudis
worth some $37 billion in an apparent bid to insulate the
world's top oil exporter from the protests across the Arab
world.
Hundreds of people on Wednesday backed a Facebook page
campaigning for a "day of rage" across the kingdom on March 11
to demand an elected ruler, greater freedom for women and the
release of political prisoners.
LIBYA
Eastern areas holding much of Libya's oil have slipped from
the control of Muammar Gaddafi, who has unleashed a bloody
crackdown on protesters to keep his 41-year grip on power. The
death toll may already be as high as 1,000 people, Italy's
Foreign Minister said.
President Barack Obama broke his silence on Libya late on
Wednesday, calling for international unity to end the violence
but did not call for Gaddafi to go.
Staff from international oil firms are among the many
leaving the country as governments around the world scramble to
send planes and ships to evacuate their citizens from the North
African producer.
Top Chinese oil and gas company China National Petroleum
Corp (CNPC) said on Thursday it had evacuated some of its
employees.
The unrest has added as much as $20 a barrel to oil as
investors price in the potential for further disruptions, but
for now supply was plentiful, Nunan said.
"There is about a $10-$20 risk premium on oil prices at the
moment, but fundamentals show that the market is still well
supplied for now even with disruptions to production in Libya,"
he said.
Weekly U.S. oil inventory data from industry group API
showed on Wednesday that petroleum stocks had risen 163,000
barrels last week, after analysts polled by Reuters had forecast
a bigger rise of 1.2 million barrels.
Distillate inventories fell a less-than-expected 534,000
barrels and gasoline supplies fell 1.6 million barrels, API data
showed, bucking analyst expectations for a rise.
The U.S. Energy Information Administration's weekly
inventory figures are due to be released later today.
Brent traded at a $13.74 spread to U.S WTI at 0455 GMT,
wider than the $13.28 close on Wednesday.
(Reporting by Luke Pachymuthu; Editing by Simon Webb)
