LONDON: Crude oil rose above $110 a barrel on Thursday after the seizure of Libya's prime minister punctured confidence that its oil exports would swiftly return to normal.
Libyan Prime Minister Ali Zeidan was captured and held for several hours by former rebel militiamen angry at the weekend capture by US special forces of a Libyan al Qaeda suspect in Tripoli.
Libya's oil output has risen to 700,000 barrels per day, after falling at mid-year to its lowest since the country's 2011 civil war as strikes, militias and political activists blocked most oilfields and ports.
Investors are anxious about when the rest of the OPEC member's oil production - total capacity is over 1.5 million bpd - will be back on stream.
"Markets were not anticipating a quick restart of the 0.9 million bpd missing crude oil production from Libya but a restart was a bearish flag," said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland.
"That flag can now be pushed further away in time."
Brent futures were $1.36 higher at $110.42 per barrel at 1400 GMT. US oil rose 8 cents to $101.69.
The spread between US crude, also known as WTI, and North Sea Brent oil was heading for its highest close since early June, as the Libyan worries were less relevant for American crude supply.
US crude was pressured as the number of Americans filing new claims for unemployment benefits hit a six-month high last week.
OPEC further lowered the forecast demand for its crude in the fourth quarter and 2014, and said its production remained higher than next year's global requirement despite a plunge in Iraqi and Libyan output.
FISCAL PROGRESS
Commodity and equity prices were also supported on signs of progress in Washington on ending the US fiscal stalemate and averting a possible debt default.
US Republicans were looking into a short-term hike in the government's borrowing authority to buy time for talks on broader policy issues, a Republican leadership aide said on Wednesday.
Renewed worry about supply from Nigeria also supported oil.
Shell Nigeria said on Wednesday it had shut its Trans Niger Pipeline (TNP) after reports of leaks, deferring 150,000 barrels per day of crude oil just 10 days after the pipeline was re-opened.
"Better supplies out of Nigeria and Libya were another bearish influence but this seems not to be the case anymore," said Christopher Bellew, broker at Jefferies Bache.
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