Oil rises near $98 as traders eye Libya supply cut

SINGAPORE – Oil prices rose slightly to near $98 a barrel Friday in Asia amid signs the crisis in Libya may have cut crude supplies less that previously estimated.

Benchmark crude for April delivery was up 36 cents at $97.64 a barrel at midday Singapore time, after falling as low as $96.39 earlier in the session, in electronic trading on the New York Mercantile Exchange. The contract fell 82 cents to settle at $97.28 on Thursday.

In London, Brent crude for April delivery gained 89 cents to $112.25 a barrel on the ICE Futures exchange.

Oil climbed as high as $103 on Thursday before the International Energy Agency said that the violent uprising in Libya has forced oil companies to idle between 500,000 and 750,000 barrels per day of production, or less than 1 percent of global daily oil consumption. That's roughly half of what Italy's Eni, Libya's largest oil producer, estimated earlier Thursday.

The Paris-based IEA also said it can make up for any lost shipments from Libya by tapping into large surpluses held by member countries, which include the U.S., the United Kingdom, France and Germany. Saudi Arabia, the biggest crude producer of the Organization of Petroleum Exporting Countries, said that it would increase production to make up for any shortfalls due to unrest in Libya, if necessary.

Oil has jumped from $84 last week amid investor concern the recent wave of unrest in the Middle East and North Africa could affect other oil-rich countries in the region.

"The fear factor in the market remains high, as the extent of contagion remains unknown," Barclays Capital said in a report. "The price correction, should the situation in the Middle East ease somewhat or in the event of OPEC production increases, is likely to be quite sharp."

Most of the eastern half of Libya has already broken away, and diplomats and ministers have abandoned Gadhafi, who has ruled the country for 41 years. He is still believed to be firmly in control only of the capital, Tripoli, some towns around it, the far desert south and parts of Libya's sparsely populated center.

On Thursday, foreign mercenaries and Libyan militiamen loyal to Gadhafi tried to roll back the uprising, attacking two cities near Tripoli in battles that killed at least 17 people. But rebels made new gains and seized a military air base.

Gadhafi said Thursday that he blamed Osama bin Laden and teenagers hopped up on hallucinogenic pills for the upheaval.

"Some form of military coup against Gadhafi seems inevitable," Capital Economics said. "Despite the bloodcurdling rhetoric, the Gadhafi regime appears to be crumbling and whoever takes over will surely want to restore business as usual as soon as possible."

In other Nymex trading, heating oil rose 1.8 cents to $2.90 a gallon and gasoline gained 1.3 cents to $2.73 a gallon. Natural gas futures were up 0.6 cent at $3.88 per 1,000 cubic feet.