* Oil futures fall, dollar index gains on euro zone worries
* Analysts see downside underpinned by Libya fighting
* Violence escalates, Gaddafi strikes in rebel heartland
(Updates prices, adds China deficit, U.S. jobs data)
By Zaida Espana
LONDON, March 10 (Reuters) - Crude oil futures slumped on
Thursday as the dollar index strengthened on fresh euro zone
credit woes, while the focus remained on Libya, where the
escalating violence triggered fears the country's oil
infrastructure could suffer long-lasting damage.
U.S. crude futures <CLc1> extended losses by 1531 GMT, down
$3.20 to $101.18.
Brent futures for April <LCOc1> were $2.11 lower at $113.83
a barrel by the same time.
"Concerns about the eurozone debt crisis have come back to
the surface after the downgrade of Spain," Commerzbank analyst
Carsten Fritsch said. "But I wouldn't expect it to continue, it
could be a short-term blip, as the general direction is upwards
because of the continued supply risk in Libya and tomorrow's day
of rage in Saudi Arabia."
A fall in the euro on the back of Moody's downgrade of
Spain's sovereign debt pushed the dollar index <.DXY> higher. A
stronger greenback typically renders dollar-denominated
commodities such as oil and gold <XAU=> more expensive.
Analysts said China's overnight surprise trade deficit data
also weighed on oil prices on worries it could signal slowing
growth, but the downside was likely to be underpinned by
escalating violence in Libya.
Tanks fired on rebel positions around the oil port of Ras
Lanuf and warplanes hit another oil hub further east on Thursday
as Muammar Gaddafi carried counter-attacks deeper into the
insurgent heartland. []
"What we are looking at is possible damages to the oil
installations. Up to now we still had the residually optimistic
scenario, but if oil installations are being damaged, there is a
completely different situation. We may have to restructure
everything in the medium term to adapt to a substitute to Libyan
oil", Christophe Barret from CA CIB said. "It means Libya could
remain out of the picture for a long time."
An official from the East Libya oil company AGOCO told
Reuters the company was making arrangements to market oil
directly to foreign buyers, instead of through its state-owned
parent. []
The oil port of Brega ran out of crude oil stocks, forcing
crude tankers to cancel shipments or travel to Saudi Arabia, a
source told Reuters. Libya turned away an oil tanker hired by
Chinese oil trading firm Unipec to lift 2.0 million barrels of
Es Sider crude, a trading source said Thursday. []
"The large explosions and enormous columns of smoke from
storage tanks and other facilities in Ras Lanuf, close to the Es
Sider terminal, are perhaps more than merely symbolic," Barclays
Capital oil analysts headed by Paul Horsnell said.
"They represent a final fading of any residual realistic
hope that the outage of Libyan oil could prove to be anything
other than prolonged."
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Graphics showing:
Middle East unrest http://r.reuters.com/nym77r
Saudi Arabia's main oil producing region
http://link.reuters.com/gew48r
FACTBOX on emergency oil stockpiles []
Graphics on U.S. strategic oil reserve, U.S. and other IEA
nations' reserves: http://link.reuters.com/cah48r
Graphic of U.S. oil stocks: http://r.reuters.com/sup48r
Brent and WTI open interest http://r.reuters.com/cag48r
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PRESSURE MOUNTS ON LIBYA
International pressure continues to mount after Russia said
it would ban all weapons sales to Libya, while Germany ordered a
freeze on bank accounts held by the Libyan central bank and the
Libyan Investment Authority. [] []
Confirming previous non-Libyan estimates, Shokri Ghanem,
chairman of Libya's National Oil Corp, said production had been
cut to about half a million barrels per day from 1.6 million bpd
by the war, as many foreign and local workers left oilfields.
[]
Libyan oil trade has been paralyzed as banks decline to
clear payments in dollars due to U.S. sanctions, though Austrian
energy group OMV said it had been buying small amounts of Libyan
crude oil and would continue to do so.
"It appears that most of Libya's bridges with OECD countries
in particular are already aflame or may have already been
burned," Barclays Capital said.
Saudi Arabia has increased production to 9 million bpd,
almost 1 million bpd above its OPEC target. The kingdom says it
holds spare capacity of 3.5 million bpd. []
Still, an OPEC delegate said on Wednesday it saw no need for
an emergency meeting to discuss raising output. []
In the United States, initial claims for state unemployment
benefits increased by 26,000 to a seasonally adjusted 397,000
last week, compared with economists forecasts of 378,000.
[]
On Wednesday, U.S. light crude fell after stockpiles at the
pricing point for benchmark West Texas Intermediate at Cushing,
Oklahoma, surged 1.7 million barrels to a record of almost 40.3
million barrels, according to the U.S. Energy Information
Administration.
That caused the discount of WTI to European marker Brent
<CL-LCO1> to widen, trading at $12.61 a barrel by 1533 GMT.
Total U.S. crude inventories rose 2.5 million barrels last
week, the EIA said, dwarfing the forecast for an increase of
just 400,000 barrels in a Reuters poll. []
(Additional reporting by Robert Gibbons in New York and
Alejandro Barbajosa in Singapore; editing by James Jukwey)
