UPDATE 11-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
                                
 * U.S. existing home sales for Feb fall 9.6 percent
                                
 
                                
 (Updates prices, adds quote, restacks)
                                
 By Jessica Donati
                                
 LONDON, March 21 (Reuters) - Oil prices rose by over $2 a
barrel on Monday as a wave of U.N.-mandated 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 $1.49 at $115.42 a barrel
by 1406 GMT after earlier trading over $116, while U.S. crude
for April <CLc1> gained $1.60 at $102.67 a barrel.
                                
 "Oil prices are still significantly higher... Concern isn't
going to go away any time soon and little pullbacks are
inevitable," said Michael Hewson, a market analyst at CMC
Markets.
                                
 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 in an uprising that has resulted
in at least four deaths over the past week. [ID:nLDE72J08F]
                                
 In Yemen, a powerful general expressed support on Monday for
protesters calling for an end to the president's 32-year rule.
[ID:nLDE72K0L1] The killing of dozens of anti-government
demonstrators prompted the country's ambassador to the United
Nations to resign in protest over the weekend [ID:nLDE72J08F] 
                                
 The 32nd biggest oil exporter lies at the mouth of a key
shipping route through which 3.2 million barrels-per-day is
estimated to have passed in 2009.
                                
 Tension also increased between Bahrain and Iran as
tit-for-tat diplomatic expulsions followed Tehran's anger at
last week's crackdown on Shi'ites. 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 because they violate the Koran's
teachings. [ID:nLDE72J042]
                                
 
                                
 PROTRACTED WAR
                                
 Headlines from Japan's troubled nuclear complex revived
worries about the country's economy as unexplained smoke from
two reactors indicated the crisis was far from over, balancing
against bullish news from the Middle East. [ID:nL3E7EL17R]
                                
 "The market is very headline driven and we don't know what
the next headline from Libya or Japan will be," said Olivier
Jakob, an oil analyst at Petromatrix.
                                
 Libya's oil output has fallen to less than a quarter of the
previous 1.6 million barrels per day (bpd), virtually paralysing
shipments from what used to be the world's 12th-largest crude
exporter.
                                
 Libyan rebels encouraged foreign air strikes to continue,
saying they aimed to capture Tripoli. [ID:nLDE72K142]
                                
 "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
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 Gaddafi's control of oil infrastructure in the long term
could mean deals with foreign oil companies are reshaped 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 an 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.
 (Additional reporting by Alejandro Barbajosa in Singapore;
editing by William Hardy)