* Disruption in Libya has cut more than 25 pct of production
* Brent rises to peak over $119/bbl, U.S. crude over $103
* Goldman says fears severe oil market shortages
* Concern of impact of wave of protests on Saudi Arabia
* For a long term technical outlook on oil:
* http://graphics.thomsonreuters.com/WT/20112402104605.jpg
* http://graphics.thomsonreuters.com/WT/20112402111227.jpg
(Updates prices)
By Luke Pachymuthu
SINGAPORE, Feb 24 (Reuters) - Brent oil surged as much as
7.7 percent to its highest price since August 2008 on Thursday
on concern the bloody unrest that has cut more than a quarter of
OPEC-member Libya's output could spread to other 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 spiked nearly $7 in the 90
minutes to 0800 GMT. It rallied as much as $8.54 a barrel to a
peak of $119.79, trimming gains to trade up $6.00 at $117.25 by
0902 GMT. The contract has risen nearly 14 percent in four days.
Reuters market analyst Wang Tao says technical charts show
Brent could be on course for a rise to $158 per barrel in 2011,
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 as high as
$103.41, the highest September 2009. It traded up $4.31 at
$102.41 at 0903 GMT.
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,"
said Ken Hasegawa, a commodity derivatives manager at Newedge
brokerage in Tokyo.
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.
Goldman Sachs said on Thursday oil markets were driven by
fear of contagion to other producing nations and that another
disruption could create severe oil shortages and require demand
rationing.
"The market cannot accommodate another disruption, in our
view, with the problems in Libya potentially absorbing half of
OPEC's spare capacity," Jeffrey Currie said in a research note.
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.
"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."
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.
Demand from China's fast growing economy also supported
prices. China cut diesel exports in January by 79 percent on the
year and raised fuel oil imports as it worked to meet a supply
crunch caused by nationwide power restrictions.
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.
The spread between Brent and U.S. crude widened to $15.66 at
0803 GMT, wider than the $13.28 close on Wednesday.
(Reporting by Luke Pachymuthu; Editing by Simon Webb)
