* Bahrain less than 100 kms from hub of Saudi oil industry
* Brent fell as much as 1 pct earlier to below $110 on Japan
* Concern rises about impact of Japan crisis on growth
-analyst
* Coming Up: U.S. consumer prices, industrial output for
Feb.
(Adds analyst comments, recasts with background)
By Alejandro Barbajosa
SINGAPORE, March 17 - Brent reversed early losses to hold
above $111 on Thursday as tensions in the Middle East kept a
floor under prices, while investors continued to weigh the
impact on energy demand from a worsening nuclear crisis in
quake-hit Japan.
Brent crude for May , the front-month contract after
April expired on Wednesday, rose 70 cents to $111.30 a barrel at
0658 GMT, after earlier falling as much as 1 percent to $109.45.
Prices have slid about 4 percent since Japan's earthquake
and tsunami six days ago, touching a three-week low of $107.35
on Wednesday. They reached a 2-1/2-year high last month as
violence in Libya disrupted the country's oil output.
Bahraini forces on Wednesday cleared a protest camp in
Manama after Saudi Arabian troops entered the country earlier
this week, when the island state's monarchy called for help from
Gulf Cooperation Council (GCC) allies.
"The government crackdown and the foreign troop deployment
may make it more difficult for a compromise to be reached
between the Sunni royal family and the mainly Shiite
protestors," said Barclays Capital analysts Helima L. Croft and
Amrita Sen.
The violence has transformed a crisis between the island's
majority Shi'ites and minority Sunnis into a regional standoff
between Sunni Gulf Arab states and non-Arab Shi'ite power Iran.
"Not only does the Saudi leadership fear growing Iranian
influence in neighbouring Bahrain, they are concerned that the
protests will spill over to their own oil-rich eastern provinces
where Shi'ites reside in large numbers," said Croft and Sen.
Bahrain lies less than 100 kms from the hub of the Saudi oil
industry at Dhahran, including the world's largest oil fields,
oil terminal and processing plant. Recent demonstrations by
Saudi Shi'ites have also centred in the kingdom's east.
"Anything that causes unrest in Saudi Arabia or causes a
supply side event in the Middle East will cause a sharp rebound
in prices," National Australia Bank commodity economist Ben
Westmore said.
U.S. crude for April gained 59 cents to $98.57.
In Japan, operators of quake-crippled Fukushima nuclear
plant dumped water on overheating reactors on Thursday while the
United States expressed growing alarm about leaking radiation
and urged its citizens to stay well clear of the area.
"There is so much uncertainty in Japan and its ability to
drive economic recovery that it's something that is casting a
shadow on the outlook for global growth," said Westmore.
"While that shadow lasts, it's going to be difficult for oil
prices to go higher. With risk aversion some money has come out
of the oil market, and there is some aversion because the demand
outlook remains so uncertain."
Japan's government aimed to increase output of refined oil
products in refineries across west Japan to compensate for idled
capacity in the east, where Friday's earthquake and tsunami hit
hardest.
In Libya, the battle for control of rebel capital Benghazi
looked just hours away after the Libyan army told people to
leave opposition-held locations and arms storage areas, but
residents said the city was quiet.
OPEC members including Saudi Arabia have increased output
partly to compensate for the loss of as much as two-thirds of
Libyan supplies, at the same time eroding spare capacity.
(Editing by Ed Lane)
