* Brent falls as much as 2.2 pct to $111.19
* Investors liquidate positions as risk aversion grows
* Japan's Nikkei share average plunges as panic grips Tokyo
* Saudi troops enter Bahrain to help calm protests
* Coming Up: IEA oil mkt report, US API weekly inventory
data
(Adds Iran objects to Saudi troops in Bahrain, updates prices)
By Alejandro Barbajosa
SINGAPORE, March 15 (Reuters) - Brent crude fell by as much
as 2.2 percent to below $112 as a deepening nuclear crisis in
Japan and rising radioactivity levels heightened risk aversion
across financial markets.
Japan warned radiation levels had become "significantly"
higher around the earthquake-stricken Fukushima nuclear power
plant after explosions at two reactors on Tuesday, while the
French embassy said a low level radioactive wind could reach
Tokyo within hours.
April Brent fell $2.02 to $111.65 a barrel at 0741
GMT after trading as low as $111.19. Prices on Monday touched a
two-week low of $111.16, down more than 7 percent from a 2-1/2
year high of $119.79 on Feb. 24. U.S. crude for April
dropped $2.12 to $99.07.
"People are going for risk aversion, so investors are
liquidating assets and positions including in crude oil and
gold," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co
Ltd.
"This is just the first reaction after Fukushima, so it's
more about sentiment. The nuclear plant issue is an unexpected,
very serious additional factor for the market because we don't
have any experience on that," Emori said.
As concern about the crippling economic impact of the
nuclear and earthquake disasters mounted, Japanese stocks
plunged more than 14 percent - heading for their biggest drop
since 1987 - compounding Monday's decline.
"The latest speculation that a nuclear cloud is floating
towards Tokyo city has terrorised the markets," said Ben Taylor,
a trader at CMC Markets.
"Further rumours of another flash crash coming has seen
value thrown out the window as panic selling sets in across
world equity markets."
Oil demand from Japan, the world's third-largest user, may
decline in the short term as manufacturing and transport slow,
but may rise with increasing need for oil-fired power generation
and in the longer term with reconstruction efforts.
Japan's earthquake has left a gaping hole in the nation's
power capacity that looks set to last months, threatening to
make economic recovery far more feeble than
hoped.
SAUDI TROOPS IN BAHRAIN
Oil markets were also eyeing developments in the Middle
East, where Saudi Arabia sent troops into Bahrain on Monday to
help calm weeks of protests by the Shi'ite Muslim majority, a
move opponents of the Sunni ruling family on the island state
called a declaration of war.
Iran said the arrival of Saudi troops in Bahrain was
unacceptable and urged the island kingdom to respond to
pro-democracy demonstrators peacefully and without foreign
intervention.
Unrest has simmered across the Middle East for two months
after popular uprisings toppled the leaders of Tunisia and
Egypt, while Libya entered a civil war that has cut oil output
by at least two-thirds of normal levels.
The protests in top oil exporter Saudi Arabia have been very
small, but in neighboring Bahrain the Sunni monarchy is facing
rising discontent from the Shi'ite Muslim majority.
Analysts saw the troop movement into Bahrain, home to the
U.S. Navy's Fifth Fleet, as a mark of concern in Saudi Arabia
that concessions by the country's monarchy could inspire the
conservative Sunni-ruled kingdom's own Shi'ite minority.
"What's happening in the Middle East is quite important to
support the market, but sentiment is affected by what will
happen in Japan first and this factor is much bigger in the
market," Emori said.
In Libya, Muammar Gaddafi's jets bombed rebels on Monday in
a counter-offensive that has pushed them back 100 miles (160 km)
in a week, far outpacing diplomatic efforts to impose a no-fly
zone to help the insurgents.
Libya's National Oil Corporation (NOC) has called on
employees to return to work at oil installations and is hopeful
oil production can soon increase, the head of NOC said on
Monday.
On the data front, markets were looking towards weekly U.S.
inventory numbers from the industry group American Petroleum
Institute later in the day and from the Energy Information
Administration on Wednesday.
U.S. crude oil stockpiles probably rose by 1.8 million
barrels last week on higher imports and as refinery utilization
edged lower as seasonal maintenance continued, a preliminary
Reuters poll ahead of the weekly inventory data showed.
(Editing by Himani Sarkar)
