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Brent climbs above $110 as Libya unrest stokes concern

10:29am EST

By Zaida Espana

LONDON (Reuters) – Brent crude futures climbed above $110 a barrel on Wednesday as turmoil in Libya fueled fears that unrest could spread to other oil-producing nations and choke supplies.

ICE Brent April crude futures were $4.46 to $110.22 a barrel by 1454 GMT (9:54 a.m. EST), after reaching an intraday high of $110.26 a barrel, trading at levels not seen since early September 2008.

U.S. light crude futures were $2.48 stronger at $97.90 a barrel, the strongest price since early October 2008.

Between 300,000-400,000 barrels per day (bpd) of Libyan output has been shut down, according to Reuters calculations, marking the first cut in oil supplies related to the recent wave of protests in North Africa and the Middle East.

“If we lose Libyan production, then you will have to replace around 1.6 million barrels per day of very good quality crude, which would introduce logistical implications and have a cost,” Credit Agricole CIB analyst Christophe Barret said.

Austria’s OMV said on Wednesday it might be heading for a full production shutdown amid the violence in Libya, which pumps 1.6 million barrels per day (bpd) or nearly 2 percent of global supply.

The comments echo remarks by Total, Repsol, Eni and BASF that they were either slowing or stopping output.

Barclays analyst Amrita Sen said in a note around 1 million bpd of Libyan crude oil output is likely to have been shut in.

Should the unrest bring production to a halt in both Libya and Algeria, Nomura analysts said oil prices could peak at $220 a barrel.

Governments across the world moved to send planes and ships to evacuate citizens from Libya, whose leader Muammar Gaddafi has vowed to crush the revolt.

Focus was also on top exporter Saudi Arabia, where ruling King Abdullah unveiled a package of benefits worth billions of riyals to mark his return on Wednesday after months of medical treatment abroad.

Jittery investors are worried about further supply disruption if protests spread in the country, which supplies around 10 percent of the world’s oil and holds most of the world’s spare capacity. On Tuesday, Saudi stopped short of pumping more oil to calm markets, saying prices were driven by fear.

PRICES IN FOCUS, U.S. STOCKS AWAITED

The International Energy Agency’s (IEA) executive director Nobuo Tanaka said prices above $100 per barrel for the rest of the year could drag the global economy back into a repeat of the 2008 economic crisis.

Analysts said U.S. light crude futures, also known as West Texas Intermediate (WTI) remained well supported following the roll of the contract, but noted that a potential build-up of weekly U.S. crude oil stockpile data due later could pressure prices.

“The fact that WTI has risen further is mainly related to the contractual rollover, as the new front month contract was $2 higher than the expiring contract,” Commerzbank analyst Carsten Fritsch said.

On the data front, investors await the January reading of existing U.S. home sales at 1500 GMT (10:00 a.m. EST), while U.S. inventory data from both American Petroleum Institute and EIA will be delayed a day after Monday’s Presidents Day holiday.

Analysts polled by Reuters expect crude inventories in the U.S. rose for the sixth consecutive time last week, ahead of the API report due at 2130 GMT and the EIA on Thursday.

(Additional reporting by Francis Kan in Singapore; editing by Jane Baird)

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