UPDATE 6-Oil up $2 to over $112 on Middle East unrest

                                
 * Bahrain Petroleum partly shuts down production
                                
 * Iraq Shi'ites rally against Saudi troops in Bahrain
                                
 * U.S. Feb inflation, weekly jobless claims
                                
 
                                
 (Updates prices, quotes, adds Iraq protests, U.S. data)
                                
 By Claire Milhench
                                
 LONDON, March 17 (Reuters) - Oil rose by more than $2 on
Thursday as unrest in Saudi Arabia, Bahrain and Libya heightened
supply disruption concerns and investors weighed the impact on
energy demand from quake-hit Japan.
                                
 Brent crude for May <LCOc1>, the front-month contract after
April expired on Wednesday, was up $2.69 to $113.29 a barrel at
1242 GMT. Overnight it fell as much as 1 percent to $109.45 but
then rebounded to an intraday high of $113.50.
                                
 U.S. crude also rallied more than $2, reaching an intraday
high of $100.67 before slipping back to $100.26 a barrel.
                                
 "The markets are still all over the place as people try to
figure out what's going to happen in Japan with the reactor,"
said Simon Wardell, oil market analyst at IHS Global Insight.
                                
 Emergency crews are still battling to cool the overheating
Fukushima nuclear plant to avert a meltdown. [ID:nL3E7EH18S]
                                
 The state-owned Bahrain Petroleum Co (BAPCO) has partly shut
down production due to staff shortages caused by political
unrest in Bahrain, trade sources said. [ID:nLDE72G110]
                                
 At least six opposition leaders have been arrested
[ID:nLDE72F2Q5] [ID:nLDE72G1BA]. A United Nations human rights
official urged Bahrain to rein in its forces [ID:nLDE72G0OM]
following Wednesday's crackdown.
                                
 Markets are concerned that the spreading unrest will further
disrupt oil supplies from the region. Iraqis have taken to the
streets in the holy Shi'ite city of Kerbala to rally against the
arrival of troops from Sunni power Saudi Arabia in Bahrain.
[ID:nLDE72G12W]
                                
 In Libya, government soldiers battled rebels on the road to
the insurgent stronghold of Benghazi [ID:nLDE72G0UF]. The United
Nations Security Council will meet later to consider its
response to the escalating violence in Libya, with a vote
planned on the no-fly zone.
                                
 Barbara Lambrecht, a commodity analyst at Commerzbank, said
the market was looking for orientation, trying to weigh the
supply disruption in the Middle East against the demand factor
from Japan: "I think we can expect more volatility," she said.
                                
 Prices had slid about 4 percent since Japan's earthquake six
days ago, touching a three-week low of $107.35 on Wednesday. But
oil rebounded following the crackdown in Bahrain.
                                
 "The focus is back on continuing unrest in the Middle East
and what will be a lot of disruption in Libya for a long time,"
said Christopher Bellew, an oil trader at Bache Commodities. 
                                
 "The risk is more to the upside -- there was a lot of long
liquidation on that sharp sell off at the beginning of the week
so we will work our way a bit higher probably."
                                
 Bahrain lies less than 100 km from the hub of the Saudi oil
industry at Dhahran, including the world's largest oilfields,
oil terminal and processing plant.
                                
 "The demonstrations in Bahrain are a potential threat to
Saudi Arabia," said Thorbjorn Bak Jensen, oil market analyst at
Global Risk Management.
                                
 Saudi Shi'ites marched in the kingdom's oil-producing east
on Wednesday, demanding the release of prisoners and voicing
support for Shi'ites in nearby Bahrain, an activist and
witnesses said. [ID:nLDE72F2M3]
                                
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 Japan disaster Top News page                    [nTOPNOW4]
                                
 Picture, graphic packages:   http://link.reuters.com/kuw58r
                                
 PDF on the impact on commodities and energy markets:  
                                
 http://link.reuters.com/bum58r 
                                
 LIVE: http://live.reuters.com/uk/Event/Japan_earthquake2
                                
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 JAPAN UNCERTAINTY
                                
 The market also struggled to assess the impact of the crisis
in Japan. Although the reconstruction effort will be
energy-intensive, manufacturing shutdowns such as that of
Toshiba's LCD assembly line may reduce the immediate demand for
electricity. [ID:nTOE72G01N] [ID:nL3E7EG170]
                                
 Any lengthy disruptions to regional production networks
could spill over into global supply chains and economic growth,
investors fear.
                                
 "With the Japanese crisis we are starting to enter an area
of systemic risk where assets can see extreme fluctuations
without necessarily a fundamental justification," Olivier Jakob,
oil analyst at Petromatrix, said in a note.
                                
 U.S. weekly jobless claims fell to 385,000, compared with a
consensus forecast for 387,000 while U.S. inflation rose 0.5
percent in February [ID:nLLAHEE7DG] [ID:nLLAHEE7DF].
 (Additional reporting by Alejandro Barbajosa in Singapore)