* Brent falls as much as 0.4 pct on Portugal worries
* Middle East unrest poses biggest upside risk -analyst
* Technicals: Brent target at $118.50/bbl aborted
(Adds euro reaction to Portuguese crisis, updates prices)
By Alejandro Barbajosa
SINGAPORE, March 24 (Reuters) - Brent crude fell for a
second day on Thursday, shedding as much as 0.4 percent towards
$115, after the resignation of Portugal's prime minister
rekindled euro-zone concerns, prompting oil traders to unwind
long positions and take profits.
Still, the market was vulnerable to spikes as attention
remained focused on turmoil across the Middle East and North
Africa, which together with a larger-than-expected drop in U.S.
gasoline inventories last week, drove WTI crude to its highest
settlement since 2008 on Wednesday.
May Brent fell as much as 49 cents to $115.06 a
barrel and was down 25 cents at $115.30 at 0530 GMT. U.S.
benchmark West Texas Intermediate declined 33 cents to
$105.42.
"The market today is taking a breather, with traders still
in the sidelines trying to evaluate what is going to happen next
in North Africa and the Middle East," said Serene Lim, a
Singapore-based oil analyst at ANZ Bank.
"Whether there will be a bailout for Portugal or not has
some consequences on how things will pan out in Europe. Risks in
the euro-zone seem to be increasing."
Portuguese Prime Minister Jose Socrates resigned on
Wednesday and warned of grave consequences for the country after
parliament rejected his government's latest austerity measures
aimed at avoiding a bailout.
The resignation was seen as increasing the likelihood that
Portugal will join Greece and Ireland in requiring a bailout
from the European Union, putting the euro under pressure. The
dollar strengthened by 0.2 percent against a basket of
currencies.
Oil prices also came under pressure from lackluster home
sales data out of top oil consumer the United States.
U.S. new home sales sank to a record low in February and
prices were the weakest in just over seven years, underscoring
the housing market's lingering malaise, which could slow the
economic recovery and hit energy demand.
But simmering tensions across the Middle East kept a floor
under prices, as Western warplanes hit Libya for a fifth night.
The U.N.-backed assault has so far failed to stop Muammar
Gaddafi's tanks shelling rebel-held towns or dislodge his armour
from a strategic junction in the east. [ID:nLDE72N006
"On a broad basis, the market seems to be still in an upward
trend," Lim said. "The risk is still very much to the upside."
Palestinian rockets struck two cities deep in Israel on
Wednesday, prompting Prime Minister Benjamin Netanyahu to
threaten lengthy "exchanges of blows" with the Hamas-ruled Gaza
Strip.
Syrian forces killed six people in an attack on protesters
in a mosque complex in the southern city of Deraa, and later
opened fire on hundreds of youths marching in solidarity,
witnesses said.
In the Arabian peninsula, Yemen's president offered to step
down by the end of the year in a bid to appease mounting demands
for his resignation, but opposition groups showed no sign of
easing up on efforts to force him out.
U.S. trading activity in crude was 45 percent below the 30
day average on Wednesday, the sixth day in a row it has traded
below that level.
U.S. crude on Wednesday was boosted by data from the Energy
Information Administration which confirmed a late Tuesday report
from the American Petroleum Institute showing a steep drop in
gasoline inventories for the week to March 18.
Gasoline stockpiles in the first three weeks of March have
shown the steepest decline for the period on records stretching
back to 1990, as refiners shed stockpiles of winter grade
gasoline ahead of the shift to summer grades.
(Editing by Himani Sarkar)
