* Risk premium unlikely to fizzle with Libya's outage
* Middle East uncertainty keeps trading volumes low
* Coming Up: API U.S. weekly inventory report
By Alejandro Barbajosa
SINGAPORE, March 22 (Reuters) - Brent crude futures were
supported near $115 on Tuesday by supply concerns triggered by
the spreading unrest in the Middle East, while uncertainty about
demand from the world's No. 3 consumer Japan capped gains.
Anti-aircraft fire rang out across Tripoli for a third night
on Monday, but air attacks on Libya are likely to slow, a U.S.
general said, as Washington holds back from being sucked into
the Libyan civil war.
"It now seems likely that there will be a significant loss
of Libyan oil supplies for some time," said Ric Spooner, chief
market analyst at CMC Markets.
"This will reduce the buffer of excess capacity and increase
the oil market's vulnerability to any new supply shocks which
may emerge. "This may see a risk premium being maintained in the
oil price for some time."
Brent crude for May gained 7 cents to $115.03 a
barrel at 0316 GMT, less than $5 from a 2-1/2-year high near
$120 reached last month. U.S. crude for April rose 17
cents to $102.50.
Rebels, who had been driven back towards their eastern
Benghazi stronghold before the air attacks halted an advance by
Gaddafi's forces, have so far done little to capitalise on the
campaign -- raising fears the war could grind to a stalemate.
Oil prices rose about 1 percent on Monday, the first day of
trading after the U.N.-backed military campaign in Libya
started. Total crude trading volumes remained well below
average, continuing last week's trend and underscoring the
uncertainty facing the market and diminished open interest,
brokers and analysts said.
U.K. Prime Minister David Cameron tried to reassure a
war-weary public on Monday that Britain's military involvement
in Libya will not drag it into another Iraq-style conflict.
In Yemen, top generals, ambassadors and some tribes threw
their support behind anti-government protesters in a major blow
to President Ali Abdullah Saleh's efforts to ride out demands
for his immediate exit.
Meanwhile, unrest spread in southern Syria on with hundreds
of people demonstrating against the government in three towns
near the main city of Deraa, but authorities did not use force
to quell the latest protests.
In Japan, the No. 1 reactor at the quake-stricken nuclear
power plant in Fukushima is now able to receive power from the
grid, Kyodo news agency reported on Tuesday, citing the plant's
operator.
The reconnection of power at the earthquake-damaged reactors
in Japan is a big step in managing the nuclear crisis, experts
said, but concerns about radiation in the air, seawater and food
showed the dangers are far from over.
Japan will allow the release of an additional 22 days worth
of crude oil from privately held reserves, the trade ministry
said. The trade ministry had already allowed the release of 1.26
million kilolitres from reserves, or three days worth of demand,
last week.
Also supportive to products were analyst expectations that
weekly reports on U.S. oil inventories will show gasoline and
distillate stockpiles fell last week.
Industry group the American Petroleum Institute will publish
inventory statistics for the week ended March 18 on Tuesday,
followed by U.S. government data from the Energy Information
Administration on Wednesday.
(Reporting by Alejandro Barbajosa; Editing by Manash Goswami)
