* Rebel advance across Libya halted by govt troops
* Plutonium found in soil at Japan nuclear plant
* Coming Up: Weekly U.S. API petroleum stocks; 2030 GMT
(Updates Libya, prices)
By Nia Williams
LONDON, March 29 (Reuters) - Oil prices turned positive on
Tuesday as Gaddafi's troops halted a rebel advance, raising
doubts among investors over how quickly the conflict in OPEC
member Libya could be resolved.
Expectations of a relatively swift restoration of Libyan oil
to the market had been building after the rebels mounted a
two-day charge westwards, retaking oil towns, but momentum
stalled on Tuesday as they hit fierce opposition around
Nawfaliyah, 120km (75 miles) east of Sirte. []
Government forces in the west launched fresh attacks on
rebels in Misrata, but U.S. ambassador to the United Nations
Susan Rice said the Obama administration had not ruled out
arming Libya's rebels. []
Brent crude for May delivery <LCOc1> was 14 cents higher at
$114.94 by 1430 GMT, after earlier falling more than a dollar.
U.S. light crude <CLc1> was 11 cents up at $104.09.
In Japan, plutonium was found in soil at the Fuskushima
nuclear complex, raising concerns it had breached the
containment system of reactor No. 3, undermining hopes the
workers were getting the plant under control. []
Analysts said Japan's lack of progress in containing the
nuclear crisis was likely to delay the world's third-largest oil
user's return to full industrial strength, but the downside for
oil prices could be limited by unrest in the Middle East.
"We have two factors that are countervailing," said Harry
Tchilinguirian, analyst at BNP Paribas.
"There is a risk premium in the Middle East built in on risk
of further contagion. On the other hand we have the fact Japan
is a major component of the global supply chain, so the
potential for a price correction in the second quarter remains."
Yemeni protesters demanded the imminent removal of President
Ali Abdullah Saleh on Tuesday and blamed him for violence that
has raised U.S. fears of chaos that could be exploited by
militant groups including al Qaeda. []
Volume for U.S. crude fell on Monday to the lowest this
year, with trade limited in part, analysts said, by concern
about the prognosis for Japan.
The dollar strengthened after St. Louis Federal Reserve
President James Bullard warned against keeping U.S. monetary
policy too loose for too long. Tighter central bank policy is
expected to lower liquidity in financial markets and possibly
curb economic growth and oil demand.
SAUDI CAPACITY
To offset Libyan disruption, Saudi Arabia has increased
output to around 9 million barrels per day (bpd), around one
million bpd more than its OPEC target, which analysts have said
has put a strain on its spare capacity.
As the kingdom scrambled to maintain its 12.5 million bpd
oil capacity, specialist energy bank Simmons & Co said on Monday
Saudi Arabia planned to expand its drilling rig count by 28
percent. []
"It's probably more bullish than bearish," said Amrita Sen,
analyst at Barclays Capital. "The flip side is there is less
spare capacity."
Inventories in the United States have been particularly
ample, which has helped to keep the price of U.S. crude around
$10 below that of European Brent.
Ahead of weekly inventory data for release on Tuesday and
Wednesday, a preliminary Reuters survey of analysts found crude
oil stocks probably rose in the United States last week in line
with seasonal trends. []
Higher imports were expected to meet demand as refiners
brought units back from maintenance, analysts said.
(Additional reporting by Barabara Lewis, Florence Tan,
Alejandro Barbajosa, Randy Fabi)
