* "Strong likelihood of price spike in Q2" - J.P. Morgan
* TECHNICALS: Brent is temporarily neutral []
* Coming Up: U.S. GDP final Q4 estimate at 1230 GMT
(Updates detail, prices)
By Christopher Johnson
LONDON, March 25 (Reuters) - Oil steadied on Friday, with
Brent crude close to $116, but analysts saw the risk of higher
prices as unrest bubbled across the Middle East and western
powers kept up a military campaign in Libya.
A massive "Day of Departure" street protest against
President Ali Abdullah Saleh began in Yemen on Friday, and
protests erupted in cities in Syria, where at least 37 have died
following demonstrations against the government of President
Bashar al-Assad. [] []
Rebel gunners fought artillery duels with Muammar Gaddafi's
forces in eastern Libya, and Western warplanes struck at armour
used by the government to crush the revolt. []
Brent crude for May <LCOc1> rose 10 cents to $115.82 a
barrel by 1415 GMT, about $4 under a 2-1/2-year high just below
$120 reached a month ago. U.S. crude <CLc1> fell 40 cents to
$105.20.
Libyan oil exports of about 1.3 million barrels per day
(bpd) have virtually vanished, eroding global spare capacity as
Saudi Arabia and other members of the Organization of the
Petroleum Exporting Countries have increased production.
This has heightened talk of the risk of higher prices as
unrest continues across the Middle East and North Africa, which
together produces more than a third of the world's oil.
"My gut feeling is that the oil market is more likely to go
up than down," said Tony Machacek, a broker at Bache Commodities
in London. "There are so many unknowns that could hit supply."
Machacek said the ICE Brent options market had "a
significant call skew", indicating that "generally people think
there is more risk of movement to the upside".
"PRICE SPIKE"
Reflecting this view, J.P. Morgan analysts headed by
Lawrence Eagles on Friday raised their forecast for Brent in the
second quarter to $118 from $105, saying "dips in volatility,
like the one that we saw this week, appear to offer good entry
points for hedging strategies. []
"So long as ongoing problems in the Middle East continue to
elevate risks of a further supply disruption, there is a strong
likelihood of a price spike in the second quarter as the market
demands additional oil to meet summer demand," J.P. Morgan said.
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More on Middle East unrest: [] []
Libya Graphics http://link.reuters.com/neg68r
Interactive graphic http://link.reuters.com/puk87r
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In Yemen, the opposition has stepped up efforts to remove
President Saleh, dismissing his offer to stand down after an
election at the end of the year.
Western countries are alarmed that al Qaeda militants
entrenched in the Arabian Peninsula country could exploit any
chaos arising from a messy transition of power if Saleh, a
pivotal U.S. and Saudi ally fighting for his political life,
finally steps down after 32 years in office. []
In Bahrain, a small island less than 100 km from the hub of
the Saudi Arabian oil industry, thousands turned out for a
sermon of a major Shi'ite cleric on Friday ahead of "Day of
Rage" protests planned despite a ban imposed under martial law.
[]
J.P. Morgan said extra OPEC supplies were needed in the
run-up to northern hemisphere summer demand, before the producer
group's next meeting in June.
"By then, it will be too late to prevent higher prices and
could extend what we see as a mid-quarter blip to a much more
serious and destabilising price surge that could distort
stock-holding behaviour and economic growth," the bank said.
The volatile mix of headlines from the Middle East over the
past few weeks has taken its toll on trading volumes as
investors await the next turn of events.
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by Jane Baird)
