* Brent falls as much as 2.4 pct to $111.16, U.S. crude
below $100
* Japan's fuel oil demand may rise to compensate for reactor
shutdowns
* Hydrogen blast rocks Japanese nuclear plant; core
container intact
* Gaddafi forces fight for control of Brega oil port
* Coming Up: Euro zone industrial output for Jan; 10 GMT
(Add reactor explosion, speculative positions, Barclays
comments)
By Alejandro Barbajosa
SINGAPORE, March 14 (Reuters) - Brent crude touched a
two-week low near $111 on Monday, down by nearly $3 on investor
pessimism that economic growth will slow after Japan's
earthquake and tsunami, while easing unrest in the Middle East
threw the focus back onto ample oil supplies.
April Brent fell as much as 2.4 percent to $111.16,
the lowest price since Feb. 25. It was down $1.94 at $111.90 at
0358 GMT, while U.S. crude fell $1.58 to $99.58. Brent
reached a 2-1/2-year high of almost $120 on Feb. 24 as a civil
war erupted in Libya, disrupting oil exports.
Japan's strongest earthquake on record on Friday shut
refineries and industrial plants in the world's third-largest
oil consumer. Infrastructure damage may curb demand in the near
term, while reconstruction may boost use further down the line.
Expectations of higher fossil fuel demand to substitute
9,700 megawatts (MW) of nuclear power capacity lost after the
8.9-magnitude quake are helping boost the value of Brent later
this year relative to the prompt prices. U.S. natural gas
rose almost 1 percent.
"If you discount what has happened in the Middle East,
events in Japan are negative for growth," said Jonathan Barratt,
managing director at Commodity Broking Services in Sydney.
"But the market perhaps is overdoing it. If you look at the
concerns of nuclear power, they are going to have to shift to
thermal- or oil-powered generation. That should support oil."
Police presence across cities in top oil exporter Saudi
Arabia sputtered planned "day of rage" protests on Friday, while
in neighbouring Bahrain the crown prince offered assurances of
national dialogue on Sunday after police fired tear gas and
water cannon at demonstrators.
"The day of rage wasn't so bad, and these are all concerns
that are in the background. Japan is more real," Barratt said.
Arab countries appealed to the United Nations on Saturday to
impose a no-fly zone on Libya as government troops backed by
warplanes fought to drive rebels from remaining strongholds in
western Libya.
Muammar Gaddafi's troops battled rebel fighters for control
of the strategic Libyan oil town of Brega on Sunday, as France
promised to push harder for a UN-backed no-fly zone over what
used to be Africa's third-largest oil producer, before a civil
war slashed output by at least two-thirds.
Saudi Arabia and other OPEC producers have increased
production, partly to offset the drop in Libyan exports.
A hydrogen explosion rocked the earthquake-stricken nuclear
plant in Japan where authorities have been working desperately
to avert a meltdown.
Japanese automakers and electronics firms shut key
factories, underscoring the challenge facing the government as
it rushes to limit the economic blow.
"A disaster like this requires quick action from Japanese
authorities and may hamper near-term growth prospects in Japan,
although it is unlikely to significantly impact the global
economic outlook," said Ben Le Brun, an analyst at CMC Markets.
Japanese stocks fell 6 percent and long-term government bond
yields rose on Monday as investors expected the natural disaster
that devastated the country's northeast to take a toll on the
economy and require significant government borrowing.
ENERGY MARKET IMPACT
Japan will move quickly to import more liquefied natural gas
(LNG) and low-sulphur fuels to generate power at thermal plants
and replace nuclear electricity supplies.
The country's demand for fuel oil at power plants was set to
rise, while in the longer-term consumption of distillates
including diesel would also increase for reconstruction.
"The downing of refineries is of course not in itself
negative for demand, as it merely affects the balance between
crude and products, but other things equal, any sustained outage
would tend to firm Asian product cracks," Barclays Capital
analysts including James R. Crandell and Paul Horsnell said.
"Reconstruction tends to be a highly resource- and
energy-intensive activity."
The front of the Brent forward curve was flat and close to
reverting to contango, a structure denoting reduced urgency for
supplies in the near term compared to future ones, after
front-month Brent commanded a premium of as much as 50 cents
over the second month as recently as mid-February.
Oil prices will fall in the short term and may rebound in
one or two months, said Jiang Jiemin, chairman of Asia's leading
oil producer PetroChina .
Speculators' net-long positions in U.S. crude futures rose
by 2 percent to hit a new record high in the week to March 8,
the Commodity Futures Trading Commission said on Friday, the
third consecutive peak.
(Editing by Himani Sarkar)
