* Operations at Libyan ports disrupted -- traders
* Concern that other big producers could suffer outages
* Coming up: S&P/Case-Shiller U.S. house price index
(Updates prices, adds fresh analyst comment, ports)
By Claire Milhench
LONDON, Feb 22 (Reuters) - Both Brent <LCOc1> and U.S. crude oil <CLc2>
rallied to 2.5-year highs on Tuesday on concerns the revolt in Libya could
spread to other major oil producers in the Middle East and North Africa.
"It's like one of those Australian bushfires -- once it takes hold, it's
very difficult to put out," said Michael Hewson, an analyst at CMC Markets.
"Until the situation in the Middle East settles down, you are going to have very
wild price swings."
At 1142 GMT, Brent crude oil futures for April delivery were up $1.36 to
$107.10, after earlier touching $108.57. U.S. crude for April delivery was up
$6.82 at $96.53 as investors and traders became increasingly nervous about
contagion.
The jump in U.S. crude is partly explained by the fact that electronic
trading of the contract occurred on Monday, but there was no settlement close as
the exchange in New York was closed for a holiday.
Libya produces around 1.6 million barrels of oil per day, and OPEC has spare
capacity of up to 6 million barrels, so even if all exports were stopped this
would not create a supply shortage, said Carsten Fritsch, an analyst at
Commerzbank.
"It is more fears that this might spread to places like Algeria, Kuwait or
the United Arab Emirates," he said.
Libya is the third-largest oil producer in Africa, and at least 100,000
barrels per day -- about 6 percent of the country's production -- have been shut
in. At 44 billion barrels, Libya has Africa's largest proven oil reserves,
according to the U.S. Energy Information Administration.
Trading sources reported that operations at Libya's ports had been disrupted
by a lack of communication. "The assumption is that the ports are either already
closed or are closing," said a trader with a company that buys Libyan oil. []
Fighting has spread to the capital Tripoli. Amid reports that African
mercenaries are being used to crack down on protesters some army troops have
switched sides to the opposition. [] []
European oil and gas firms such as Shell <RDSaL> have evacuated staff and
German company Wintershall has wound down production as a precautionary measure.
[] []
The Arab League plans to hold an emergency meeting in Cairo at 1500 GMT to
discuss the Libyan revolt. []
World leaders have condemned the use of force against protesters in Libya,
where at least 233 have been killed, according to Human Rights Watch.
[] []
Cracks are now appearing among Gaddafi's supporters, with some ambassadors
resigning and the Libyan mission to the United Nations calling on the army to
"move towards Tripoli and cut the snake's head". []
U.S. crude for March delivery <CLc1>, which expires on Tuesday, was up $7.22
at $93.42 after also earlier touching a 2.5-year high at $94.49.
Hewson thought U.S. crude could rally further when New York opens this
afternoon. "Brent has broken above a key level at $105, so the bias will remain
to the upside while Libya is in flames," he said.
He pointed out that there were also tensions in Bahrain which are raising
fears the unrest could spill over the border into Saudi Arabia. []
"Never assume anything in this business," he said. "While at the moment
Saudi Arabia is quiet, there is a worry it could spread."
SUPPLY DISRUPTION
A wave of protests across North Africa has had little impact on oil supply
until now. The outages in Libya this week are the first to impact supply.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Factbox on Libyan oil and gas: []
Libyan oil map: http://r.reuters.com/jem28r
Interactive factbox on MidEast, Africa http://link.reuters.com/puk87r
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International Energy Agency (IEA) chief economist Fatih Birol said on
Tuesday that oil prices were in the danger zone and could rise further if
turmoil continued in the Middle East. []
(Additional reporting by Francis Kan; Editing by Jason Neely)
