* Libya unrest cuts oil output by as much as 1.2 mln bbls
* Key Libyan oil terminals in Libya held by rebels
* Saudi in talks with Europe's refiners to supply more
(Previous SINGAPORE, update throughout)
By Ikuko Kurahone
LONDON, Feb 25 (Reuters) - Oil retreated from highs, briefly
turning negative, on Friday as top exporter Saudi Arabia said it
was willing to step in to make up for any shortages as a result
of a disruption to oil supplies from Libya.
ICE Brent crude futures <LCOc1> was up 25 cents at $111.61 a
barrel by 0912 GMT, retreating from $113.91 earlier in the day.
It touched a two-and-half year high of $119.79 on Thursday.
U.S. crude futures <CLc1> was up 27 cents at $97.55, off
$99.20 earlier in the day, It hit $103.41 on Thursday, its
highest since September 2008.
Unrest in Libya has cut a large chunk of the North African
and OPEC member country's output of 1.6 million barrels per day
(bpd), and a senior Saudi official on Thursday said Saudi Arabia
was in talks with European companies affected by the disruption.
[]
The estimates of shut-in volume varies. The International
Energy Agency said Libyan oil output to have been cut by 500,000
to 750,000 bpd due to the unrest, while Italian oil company ENI
<ENI.MI> said as much as 1.2 million bpd may be down.
[]
Still, key Libyan crude and oil product terminals east of
the capital are in the hands of rebels who have seized control
from leader Muammar Gaddafi. []
The unrest in Libya followed massive protests in Tunisia and
Egypt which led to the toppling their long-time leaders and has
spread to other Middle East Gulf nations.
"When geopolitics in the Middle East are at play in the oil
markets, all conventional bets on the direction of oil prices
based on supply and demand fundamentals, or economic variables,
are off," analysts at BNP Paribas said in a research note.
The Libyan supply outage and concern that supply problems
may spread has driven up short-term prices for oil more than
those for later dates and led to the return of backwardation in
the Brent crude market.
The second-month Brent <LCOc2> contract is at its highest
premium to the twelfth-month contract since April 2008.
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Graphics on crude prices, volumes and outlook:
http://link.reuters.com/pab38r
http://link.reuters.com/nab38r
Graphic on Brent backwardation:
http://graphics.thomsonreuters.com/AS/0810/NT_112502141533.jpg
Unrest in Mideast, N. Africa: [] A
Analysis on impact on Libyan oil sector: []
Interactive factbox http://link.reuters.com/puk87r
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Saudi Arabia has yet to make an official statement on the
talks, but sources said the country was able to pump more of the
kind of high-quality crude produced by Libya and it could be
shipped quickly to Europe with the help of a pipeline that
crosses the kingdom.
Saudi Arabia is the only oil producer with significant spare
capacity to meet global supply outage volume such as the
reduction in the flow from Libya.
Physical oil traders, however, said the difference in
qualities between Saudi and Libyan oils may make it difficult to
fill in the supply gap immediately.
(Additional reporting from Randy Fabi in Singapore; Editing by
Jason Neely)
