* Brent near 2-1/2 year high on Mideast, N. Africa unrest
* Attention also focused on elections in Nigeria
* Chinese interest rates up 0.25 pct, fourth rise since Oct
* Coming Up: U.S. API petroleum stocks at 2030 GMT
(Releads, updates prices, adds detail)
By Jessica Donati
LONDON, April 5 (Reuters) - Oil prices held near 2-1/2 year
highs on Tuesday, with Brent crude topping $121 a barrel as
unrest in oil exporting countries in the Middle East and Africa
outweighed China's fourth interest rate hike since October.
Diplomatic efforts to end the war in Libya remained stalled
as clashes over the oil town of Brega continued while Western
air strikes continued to target Libyan leader Muammar Gaddafi's
military power. [] []
The stalemate fuelled fears of a prolonged loss of oil
exports from Libya despite reports that a first cargo of crude
oil is due to be loaded by rebels on Tuesday.
Brent crude for May <LCOc1> was 1 cent up at $121.07 a
barrel at 1253 GMT after closing at $121.06 a barrel on Monday,
the highest settlement since Aug. 1, 2008.
U.S. crude <CLc1> was 47 cents lower at $108 a barrel after
settling at $107.78 on Monday, the highest since Sept. 22, 2008.
"It's looking overbought and we might see a bit of a
correction now, but now that Brent has broken above $120 it's
hard to put a top on it," said Rob Montefusco, an oil trader at
Sucden Financial.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
FACTBOX on Libya's oil production: []
More on Middle East unrest: []
Libya Graphics http://link.reuters.com/neg68r
Interactive graphic http://link.reuters.com/puk87r
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The fourth Chinese interest rate increase since October
briefly triggered a decline of around $1 a barrel in oil prices,
but markets pared the bulk of losses on reports of election
chaos sparking anger in Nigeria on Tuesday. []
"The market doesn't seem that bothered about Chinese
interests rates any more, which seems totally crazy to me," said
David Morrison, a strategist at GFT.
TIGHT SUPPLY?
The perception of tight fundamentals has helped trigger
price gains on relatively small output interruptions, which have
been compounded by the erosion of spare capacity from top
exporter Saudi Arabia, analysts said.
"Spare capacity is eroding and together with the
geopolitical backdrop where Nigerian outages are very much on
the cards with the upcoming elections, upward pressure on prices
could well continue," said Amrita Sen, an analyst at Barclays
Capital.
The kingdom has raised supply and introduced lighter grades
of oil to help fill in for missing Libyan output, but traders
question how much more room for output increases remains.
Former Saudi oil minister Sheikh Zaki Yamani told Reuters
the U.S. would continue to be dependent on exports from Saudi
Arabia despite plans to cut oil imports by a third over the next
decade announced by U.S. President Barack Obama last week.
He said oil prices could leap to $200 to $300 a barrel if
Saudi Arabia is hit by serious political unrest. []
Worries about oil supply also focused on Nigeria after
elections there were postponed by a week due to logistical
problems, sparking fury among voters who were promised a break
with a history of flawed and violent polls. []
Nigerian militants have previously hit supplies of the
country's oil, a sweet crude that has jumped to a premium as a
result of the Libyan outages.
"We have already lost good grades in Libya, and now the
elections in Nigeria are providing further potential upside,"
Sucden Financial oil trader Montefusco added.
However, production was restarting in Gabon, which produces
a similar grade of oil, after energy worker strikes completely
cut off the country's near 240,000 bpd of output.
Total <TOTF.PA> and Royal Dutch Shell <RDSa.L>, key
producers in Gabon, both said they were working to restore
normal production as soon as possible. []
The discount of U.S. crude futures to Brent <CL-LCO1=R>
widened to $13.02 at 1258 GMT, gaining around $2 a barrel since
the start of trade this week, but remained distant from a record
$17.12 a barrel spread at the start of March.
Weekly industry and government petroleum inventory reports
are forecast to show a 1.4 million build in U.S. crude
inventories, a 1.9 million barrel decline in gasoline stockpiles
and a 200,000 barrel drop in distillates, according to a Reuters
poll of analysts. []
(Additional reporting by Seng Li Peng and Simon Webb in
Singapore; editing by Alison Birrane)
