UPDATE 10-Brent oil surges above $101 on Egypt uncertainty

                                
 * OPEC doesn't see Egypt unrest threatening oil supply
                                
 * Improved outlook, U.S. economic data also support oil
                                
 * Coming up: API oil inventory data, 4:30 p.m. EST Tuesday
 (Recasts, updates with settlement prices and market activity)
                                
 By Robert Gibbons
                                
 NEW YORK, Jan 31 (Reuters) - Brent oil prices jumped above
$101 a barrel for the first time since 2008 on Monday on
concern that unrest in Egypt could spread to Middle Eastern
crude-producing countries or disrupt Suez Canal flows.
                                
 Egyptian President Hosni Mubarak overhauled his government
in an attempt to defuse a popular uprising but protesters
rejected the changes and said he must surrender power. The Suez
Canal continued to operate normally. [ID:nLDE70U00B]
[ID:nLDE70U1BD]
                                
 Brokers and analysts also pointed to a recently improving
economic outlook and demand growth already providing bullish
momentum for oil prices, along with heating fuel demand boosted
by severe cold snaps during the Northern Hemisphere winter.
                                
 Monday saw more supportive economic data from the United
States in the form of better Midwest factory activity and
firmer consumer spending. [ID:nN31151915]
                                
 The OPEC oil producers group has refrained from announcing
any output boost, despite consumer countries' trepidation about
the threat posed by elevated oil prices to economic recovery.
                                
 In London, ICE Brent crude for March <LCOc1> rose $1.59 to
settle at $101.01 a barrel and reached $101.73 intraday, the
highest since prices touched $103.29 on Sept. 29, 2008.
                                
 U.S. crude oil for March delivery <CLc1> rose $2.85, or
3.19 percent, to settle at $92.19 a barrel, reaching $92.84
intraday, both the highest since October 2008.
                                
 Analysts and brokers had expected Brent's move over $100 to
help U.S. crude push above $92.58, the previous 2011 peak from
Jan. 3.
                                
 "Momentum is up. Traders are buying dips on fears that
things could escalate further in the Middle East and spread to
other countries," said Tom Bentz, broker at BNP Paribas
Commodity Futures Inc in New York.
                                
 Oil prices were choppy earlier, with traders reassessing
Friday's price surge after fears about contagion failed to
materialize at the weekend.
                                
 The U.S. price strength narrowed the benchmark West Texas
Intermediate crude's discount to Brent to less than $9 a barrel
after the spread <CL-LCO1=R> widened to a near record above $12
a barrel last week.
                                
 Dwindling North Sea production and high U.S. crude
inventories, especially at the Cushing, Oklahoma, WTI delivery
point, have been factors seen as causing the spread to widen,
along with investors' attraction to the bullish momentum.
                                
 CONTAGION FEAR
                                
 Egypt is not a major oil producer but protests and demands
for political change there come two weeks after Tunisia's
president was overthrown and investors worry that oil-producing
states in the region may face similar protests.
                                
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 For more on Egypt and oil from Reuters Insider:
                                
 http://link.reuters.com/wap77r
                                
 For a feature on the Suez canal: [ID:nLDE70T0IY]
                                
 For an analysis on investor risks in Egypt:
                                
 [ID:nLDE70S0LP]
                                
 For a FACTBOX on energy risks in Egypt: [ID:nN28166007]
                                
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 Egypt controls the Suez Canal and the Suez-Mediterranean
(SUMED) Pipeline, which together moved over 2 million barrels
per day (bpd) of crude and oil products in 2009.
                                
 Shipping has so far proceeded as normal through the 192-km
(120-mile) Suez Canal shipping choke point but port operations
have been slowed by the protests. [ID:nL3E7CV08K]
                                
 OPEC RESPONSE
                                
 OPEC Secretary General Abdullah al-Badri said the producer
group would boost oil supply in the event of a real shortage,
but did not expect unrest in Egypt to affect the Suez Canal or
SUMED pipeline oil flows. [ID:nLDE70U0K8]
                                
 OPEC ministers will discuss oil output policy on the
sidelines of a conference in Saudi Arabia next month, an OPEC
delegate told Reuters. [ID:nSGE70U001]
                                
 Ministers are scheduled to meet on Feb. 22 in Riyadh with
counterparts from oil-consuming nations and the International
Energy Agency gathering at the International Energy Forum.
                                
 But Saudi Oil Minister Ali al-Naimi told an industry
conference that the price spike had more to do with the value
of the dollar and the behavior of oil traders. [ID:nWLA4102]
                                
 The dollar weakened against a basket of currencies, with
the dollar index <.DXY> dropping 0.41 percent as euro zone
inflation topped forecasts, supporting the view that interest
rates in the region could rise before those in the United
States. [USD/]
 (Additional reporting by Gene Ramos and Janet McGurty in New
York, Jessica Donati in London and Alejandro Barbajosa in
Singapore; Editing by Dale Hudson)