* U.S. considers tapping emergency stockpiles to lower
prices
* U.S. crude closes in on European benchmark Brent
* Clerics ban protests in top oil exporter Saudi Arabia
* Coming Up: ECB's Trichet presser; 1130 GMT
(Adds implications for economy, RBS comments)
By Alejandro Barbajosa
SINGAPORE, March 7 (Reuters) - U.S. crude surpassed
$106 to reach the highest price in 2-1/2 years on Monday as a
counter-offensive by Libya's Muammar Gaddafi against rebels
deepened concerns that a civil war is brewing in Africa's
largest holder of oil reserves.
U.S. crude for April rose as much as $1.81 to $106.23 a
barrel, the highest price since September 2008, adding to
concerns that high energy prices may derail the global economic
recovery. It was up $1.55 at $105.97 at 0308 GMT.
This year's 16 percent rally in U.S. crude has prompted the
Obama administration to consider releasing emergency oil
stockpiles as policymakers seek ways to contain a negative
spillover to the rest of the economy.
ICE Brent crude for April gained $1.17 to $117.14,
still more than $2 away from the contract's peak this year at
$119.79 on Feb. 24. Its premium over U.S. benchmark West Texas
Intermediate (WTI) has narrowed to about $11 from more than $15
last week.
"The concern is that with what we are seeing in Libya, it's
purely fear driving the market," said Jonathan Barratt, managing
director at Commodity Broking Services in Sydney.
"Each time the price moves up a little, people are forced
into the market. Once it's feeding itself, it will continue to
rise," Barratt said, adding $120 may be the peak without further
supply disruptions.
U.S. unemployment in the U.S. fell to near a two-year low in
February, jobs data showed on Friday, but a surge of 23 percent
in Brent prices this year threatens that positive turnaround.
Oil prices may slip back to more "realistic" levels around $80
later this year, Barratt said.
White House Chief of Staff William Daley said on Sunday U.S.
President Barrack Obama was considering tapping into the
strategic petroleum reserve (SPR) as a way to lower prices,
adding that "a bunch of factors have to be looked at," not just
prices.
High prices also threaten Asian economies. "At $120 a
barrel, we estimate oil prices to shave off 1.5 percentage point
from baseline growth" for Asia excluding Japan, RBS economists
Sanjay Mathur and Erik Lueth said.
Troops loyal to Gaddafi launched counter-offensives against
rebel-held towns on Sunday backed by tanks, artillery, warplanes
and helicopters, attacking positions near the rebel-controlled
oil port of Ras Lanuf, 660 km (410 miles) east of the capital.
News about the potential use of U.S. emergency oil stocks
failed to dampen prices as investors remained jittery that the
unrest in oil-producing nations of the Mideast Gulf may escalate
and affect crude production there.
"It doesn't matter what they say because it's fear," Barratt
said, referring to the Obama administration's possible use of
the SPR. "We have ample supplies after OPEC, led by Saudi
Arabia, stepped in."
Saudi Arabia, the world's largest oil exporter, has pledged
to fill any supply gap caused by the disruption of exports from
Libya. The kingdom is pumping around 9 million bpd and has spare
capacity of around 3.5 million bpd, a senior Saudi source told
Reuters last week.
Saudi security forces have detained at least 22 minority
Shi'ites who protested last week against discrimination,
activists said on Sunday, as the kingdom tried to keep the wave
of Arab unrest outside its borders.
Saudi Shi'ites last week staged small demonstrations in the
Eastern Province, which holds much of the oil wealth of the
world's top crude exporter, leading clerics to ban protests.
The province is near Bahrain, the scene of protests in
recent weeks by majority Shi'ites against their Sunni rulers.
More than 17,000 people backed a call on Facebook to hold two
demonstrations in Saudi Arabia this month, the first one this
coming Friday.
In Libya, Gaddafi has lost control to rebels of most of the
country's east, the main oil producing region in the OPEC member
nation. Many oil facilities are idle or working at well below
capacity.
Oil sources said refining operations and exports of crude by
firms operating in the town, including units or ventures with
the state-owned National Oil Corp (NOC), had ground to a halt
over previous days because of the unrest and supply problems.
Rebels now hold an area west of Ras Lanuf that includes
al-Sidrah, the last major oil terminal town in the east of the
country. That would mean rebels now have all the main oil
terminals in the east of Libya in their hands.
Libya usually produces 1.6 million barrels of oil per day
(bpd), but output has been slashed by as much as 1 million bpd,
according to the International Energy Agency.
Emergency strategic oil reserves held by the International
Energy Agency member nations are equivalent to almost three
years of Libyan crude output, highlighting the ability of some
of the world's largest energy users to compensate for
disruptions to supply over extended periods.
(Editing by Himani Sarkar)
