* Libya conflict unresolved, Middle East still tense
* Coming Up: API U.S. weekly inventory report
(Updates prices, adds analyst comment)
By Nia Williams
LONDON, March 22 (Reuters) - Oil prices eased on Tuesday as
an anticipated slowdown in Western air strikes on Libya and some
respite in Middle East protests convinced some investors the
market was overbought.
Anti-aircraft fire rang out across Tripoli for a third night
on Monday, but U.S. President Barack Obama, wary of getting
sucked into a Libyan civil war, said the United States will cede
control of the air assault in days. []
In the Middle East, where violent unrest over the weekend
supported crude prices, protests appeared to have dampened down
except in Saudi Arabia's neighbour Yemen, whose president warned
of civil war if he is forced to quit. []
Brent crude <LCOc1> was 50 cents lower at $114.46 at 1345
GMT, still within sight of a two and a half year high near $120
hit last month. U.S. crude for May <CLc2>, the most liquid
contract before the expiry of April later on Tuesday, shed 40
cents to $102.69.
"Markets have already priced in a lot of risk in the Middle
East and Libyan oil production has been off for a while now,"
said Olivier Jakob, analyst at PetroMatrix. "We would need some
new news on the Middle East to take prices much higher."
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More on Middle East unrest: [] []
US military leads on Libya but for how long? []
Libya Graphics http://link.reuters.com/neg68r
Technical analysis on Brent []
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Oil gained around 1 percent on Monday, the first trading day
after U.N.-backed western powers launched the military campaign
but Libyan rebels have so far done little to capitalise on their
advantage, fuelling speculation the conflict could grind to a
stalemate.
Although lost Libyan output may be largely priced in,
traders will keep a close eye on any protests in countries
bordering OPEC king-pin Saudi Arabia, the world's only "swing
state" with enough spare capacity to plug serious production
shortfalls elsewhere. [] []
Iraqi oil minister Abdul-Kareem Luaibi said on Tuesday that
OPEC believes the oil price is approaching $120 per barrel but
unlikely to go higher, a level that is "acceptable" and will not
hinder global growth. []
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Samuel Ciszuk, Senior Middle East & North Africa Energy
Analyst at IHS Energy, will hold a Q+A session in the Global Oil
Forum at 1500 GMT on Tuesday, looking at the rapidly evolving
situation in Yemen, Libya and Syria and assessing political and
economic risk across the region.
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JAPAN CRISIS
Prices have seesawed over the past week as concerns over
Western military intervention in Libya offset the risk aversion
that swept global financial markets after Japan's worst
earthquake on record, tsunami and resulting nuclear crisis.
Japan will allow the release of an additional 22 days worth
of crude oil from privately held reserves in a bid to ease
energy shortages the trade ministry said, after allowing the
release of 1.26 million kilolitres of reserves, or three days
worth of demand, last week. []
"This should bridge short-term supply gaps after the
earthquake disaster. Japan's oil demand should rise accordingly
when these stocks are replenished," Commerzbank analysts said in
a note, adding 20 percent of lost nuclear energy production
would have to be made up by fossil fuels.
Analysts expect weekly reports on U.S. oil inventories will
show gasoline and distillate stockpiles fell last week, which
should support product values. []
Industry group the American Petroleum Institute will publish
inventory statistics for the week ended March 18 on Tuesday,
followed by U.S. government data from the Energy Information
Administration on Wednesday.
(Additional reporting by Alejandro Barbajosa, editing by
William Hardy)
