* Rumor of Gaddafi seeking exit deal pulls crude off highs
* U.S. considers tapping emergency stocks to lower prices
(Recasts, updates prices and market activity, changes byline
and moves dateline from previous LONDON)
By Robert Gibbons
NEW YORK, March 7 (Reuters) - Brent crude prices rose above
$118 a barrel and U.S. prices pushed to their highest level
since September 2008 on Monday, before paring gains in volatile
trading, lifted by Libya's conflict and the threat of wider
supply disruptions in the Middle East.
In addition to supply shut in by the Libyan fighting,
estimated to be about 1 million barrels per day, the prospect
of unrest spreading to larger producers, such as Saudi Arabia,
has kept investors concerned about the potential for more
disruptions.
Oil traders in New York and London said prices fell back
from the early peaks as some participants decided to lock in
profits and on talk that Libyan leader Muammar Gaddafi was
trying to negotiate an exit from Libya.
Brokers also noted increasing pressure on the U.S.
government to tap strategic oil reserves as gasoline prices
push higher as crude prices jump.
Brent crude futures for April delivery <LCOc1> were up 62
cents at $116.59 a barrel at 12:01 p.m. EST (1701 GMT), pulling
back from their earlier $118.50 peak.
U.S. crude futures for April delivery <CLc1> were 85 cents
higher at $105.27 a barrel, off an intraday high of $106.95.
That intraday peak was U.S. crude's highest price since
Sept. 26, 2008, when front-month crude reached $108.11.
Brent's premium to its U.S. counterpart <CL-LCO1=R> fell 12
cents to $11.20, having narrowed from the March 1 record above
$17.
LIBYAN FIGHTING
Government forces seeking to dislodge rebels from Libya's
strategically important coast struck at the Ras Lanuf oil town
amid quickening efforts to prevent more humanitarian suffering
and a mass refugee exodus. []
A leading member of Libya's ruling establishment appealed
to rebel leaders for dialogue in the clearest sign yet Gaddafi
may be ready to compromise with opponents challenging his rule.
[]
The offer was dismissed by rebel leaders.
Saudi Arabia's security forces 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.
[]
"The major risk remains the prospect of the political
unrest spreading to the Gulf producing region," said Caroline
Bain, an economist at the Economist Intelligence Unit.
"However, even if there is civil unrest in Saudi Arabia, it is
not a given that oil production will be affected."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Reuters Insider: John Kozey says crude set for pullback
http://link.reuters.com/dud48r
FACTBOX on emergency oil stockpiles: []
Graphics on U.S. strategic oil reserve, U.S. and other IEA
nations reserves: http://link.reuters.com/cah48r
Graphics showing:
Middle East unrest http://r.reuters.com/nym77r
Oil price shocks http://r.reuters.com/qes28r
Countries most reliant on oil http://r.reuters.com/dux28r
OECD commercial oil stocks http://link.reuters.com/qyg48r
Brent and WTI open interest http://r.reuters.com/cag48r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
STRATEGIC PETROLEUM RESERVE OPTION
A coordinated release of strategic oil stocks was deemed
not yet needed because the supply disruption caused by the
uprising in Libya is not that big, the International Energy
Agency said. []
But the U.S. government has reiterated that it could tap
its strategic oil reserves in order to safeguard economic
growth.
Echoing comments made by a number of Obama administration
officials over the past week, White House Chief of Staff
William Daley told NBC television on Sunday that the "issue of
the reserves is one we are considering." []
(Additional reporting by Alex Lawler and Karolin Schaps in
London and Alejandro Barbajosa in Singapore; Editing by Walter
Bagley)
