Oil prices rose 1 percent on Monday as spreading unrest in the Middle East intensified concerns about potential threats to the region's oil supply and UN-mandated air strikes kept flow reduced from Opec-member Libya.
Failure of both Brent and US crude prices to reach Friday's intraday highs, the approaching expiration Tuesday of the US April crude contract and lingering concern about oil demand in Japan as it deals with its post-earthquake nuclear reactor crisis helped pull oil down from its early peak.
Total crude trading volumes remained well below average, continuing last week's trend and underscoring the uncertainty facing the market and diminished open interest, brokers and analysts said.
Brent crude futures for May delivery rose $1.03, or 0.9 percent, to settle at $114.96 a barrel, off its intraday peak of $116.22. US crude futures for April delivery rose $1.26, or 1.25 percent, to settle at $102.33 a barrel, off its high of $103.35. The April contract expires on Tuesday.
Brokers noted that both front-month Brent and US crude met resistance ahead of their respective Friday intraday peaks of $117.29 and $103.66, hit before the "cease-fire" declaration by Gaddafi's government in Libya pulled prices from their intraday highs.Unrest flared again in the Middle East over the weekend, spreading to authoritarian Syria. In Saudi Arabia's neighbour Yemen top generals, ambassadors and some tribes threw their support behind anti-government protesters in a major blow to President Ali Abdullah Saleh's efforts to ride out demands for his exit.
Tension also increased between Bahrain and Iran as tit-for-tat diplomatic expulsions followed Tehran's anger at last week's crackdown on Shi'ites. Bahrain's king on Monday announced a foreign plot had been foiled. Top-exporter Saudi Arabia has not yet experienced the kind of mass uprisings that have rocked other parts of the Arab world this year.
Criticism of the Western air attacks on Libya came from Russia and China, who along with India, Brazil and Germany abstained from the UN Security Council vote last week authorising the use of force against Gaddafi. The critiques raised the possibility of reshaped Libyan oil deals, shutting out countries involved in the UN-authorised attacks, if Gaddafi retains control of oil infrastructure.
Libya is considering offering oil block contracts directly to China, India and other nations it sees as friends, Libya's top oil official said on Saturday. Libya's oil output has fallen to less than a quarter of the 1.6 million barrels per day (bpd) produced prior to the rebellion against the Gaddafi rule. Headlines from Japan's troubled nuclear complex revived worries about the country's economy as unexplained smoke from two reactors kept investors uncertain.
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