UPDATE 8-Oil rises as Western powers strike Libya

                                
 * Brent touches high of $116.22; U.S. crude tops $103
                                
 * Supply disruption worries mount as Mideast unrest grows
                                
 * Coming Up: U.S. existing home sales for Feb: 1400 GMT
                                
 
                                
 (Updates throughout, previous SINGAPORE)
                                
 By Jessica Donati
                                
 LONDON, March 21 (Reuters) - Oil prices rose by more than 1
percent on Monday as a United Nations mandated wave of
airstrikes on Libya and proliferating unrest in the Middle East
fanned concerns about oil supply from the region.
                                
 Brent crude for May <LCOc1> was up $1.44 to $115.37 a barrel
by 0950 GMT, while U.S. crude for April <CLc1> gained $1.70 to
$102.77 a barrel.
                                
 "With the nature of the external military involvement
becoming clearer, there is a further escalation of the situation
and the damage to infrastructure might be larger, keeping Libya
out of the oil market for longer," said Amrita Sen, an analyst
at BarCap.
                                
 Unrest flared in even the most authoritarian regimes in the
Middle East over the weekend. In Syria, crowds set fire to
ruling Baath Party headquarters, its main courts complex and
phone company branches in an uprising that has resulted in at
least four deaths over the past week. [ID:nLDE72J08F]
                                
 In Yemen, the killing of dozens of anti-government
demonstrators in Yemen prompted the country's ambassador to the
U.N. to resign in protest on Sunday. [ID:nLDE72J08F]
                                
 Tension also spiralled between Bahrain and Iran as
tit-for-tat diplomatic expulsions followed Tehran's anger at
last week's crackdown. On Monday, Bahrain's king announced a
foreign plot had been foiled and thanked fellow Sunni-ruled
neighbours (notably Saudi Arabia) for their support.
[ID:nLDE72K032]
                                
 "The key is really how Saudi (Arabia) and Iran play out.
Cool heads need to prevail. It's contained at the moment but if
things worsen, you see a Mideast premium very quickly," said
Jonathan Barratt, managing director of Commodity Broking
Services.
                                
 Saudi Arabia, a U.S. ally, has not seen the kind of mass
uprisings that have rocked the Arab world this year, but dissent
has built up as unrest has taken root in neighbouring Yemen,
Bahrain and Oman.
                                
 Dozens of Saudi men gathered outside the Interior Ministry
in the capital Riyadh on Sunday to demand the release of jailed
relatives, amid a heavy police presence. Saudis have been warned
protests will not be tolerated as they violate the Koran's
teachings. [ID:nLDE72J042]
                                
 
                                
 PROTRACTED WAR
                                
 U.N.-backed strikes led by the United States, the UK and
France raised the stakes in a civil war that has cut Libya's oil
output to less than a quarter of the previous 1.6 million
barrels per day (bpd), nearly paralysing shipments abroad from
what used to be the world's 12th largest crude exporter.
                                
 "The main question for the oil markets is how long
production outage could last ... We could end up by having two
countries or a protracted civil war. We assume Libyan oil
exports will be zero for the next six months" said Mike Wittner,
Head of Commodities Research at Societe Generale.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
  More on Middle East unrest:       [nTOPMEAST]  [nLDE71O2CH]
  US military leads on Libya but for how long?   [nN19235888]
  Libya Graphics               http://link.reuters.com/neg68r
  Map of Benghazi              http://link.reuters.com/gyv58r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 Military action on Libyan air defences over the past two
days, sanctioned by the U.N. in a Security Council resolution on
Thursday, has crippled Muammar Gaddafi's capability to launch
airstrikes and detect foreign aircraft, a senior U.S. military
official said on Sunday.
                                
 But Gaddafi's control of oil infrastructure in the long term
would probably mean reshaping deals with foreign oil companies
in favour of countries not participating in the attacks.
                                
 Libya is considering offering oil block contracts directly
to China, India and other nations it sees as friends, Libya's
top oil official said on Saturday, instead of open bidding
processes. [ID:nLDE72I0BX]
                                
 China, India, Russia, Brazil and Germany were the five
nations that abstained in last week's U.N. vote to authorise the
use of force against Gaddafi. The other 10 members of the
Security Council voted in favour.
                                
 The weekend's military intervention to protect civilians
caught up in a one-month-old revolt against Gaddafi drew
criticism from Arab League chief Amr Moussa, who questioned the
need for a heavy bombardment he said had killed many civilians.
 (Additional reporting by Alejandro Barbajosa in Singapore;
editing by James Jukwey)