UPDATE 8-Oil slides further on Japan nuclear concerns

                                
 * Brent falls below $108/bbl for first time since Feb. 23
                                
 * Japan's Nikkei share average plunges as panic grips Tokyo
                                
 * Coming up: US API weekly inventory data
                                
 
                                
 (Updates prices, analyst comment)
                                
 By Nia Williams
                                
 LONDON, March 15 (Reuters) - Oil prices dropped sharply on
Tuesday with Brent crude falling below $108 a barrel for the
first time in nearly three weeks as a deepening nuclear crisis
in Japan heightened risk aversion across financial markets.
                                
 Japan's nuclear crisis is equivalent to number six on the
INES scale of nuclear accidents from one to seven, Kyodo news
agency quoted the French Nuclear Agency as saying. The 1986
Chernobyl disaster was a seven and Three Mile Island a five.
                                
 There was panic buying in Tokyo shops after explosions at
two nuclear reactors sent a low-level radioactive wind towards
the capital, although officials said radiation levels at the
stricken Fukushima Daiichi nuclear complex had fallen after an
earlier spike. [ID:nLDE72E073]
                                
 April Brent <LCOc1> fell $4.29 to $109.38 a barrel at 1212
GMT after earlier falling by more than $5 to as low as $107.88.
U.S. crude for April <CLc1> dropped $3.35 to $97.84 after
slipping as much as $4 earlier in the session.
                                
 "This is a massive risk off day today," said Christin Tuxen,
analyst at Danske Bank. "The risk averse sentiment is coming
through both in the equity market and euro/dollar. It's weighing
on oil even though fundamental drivers should suggest an upside."
  <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 Japan's unfolding disaster:     http://r.reuters.com/mak58r
 Japan graphics suite:           http://r.reuters.com/quh58r
  How a meltdown can occur:       http://r.reuters.com/rah58r
  Nuclear plants, quakes zones:   http://r.reuters.com/qah58r
  LIVE COVERAGE  
http://live.reuters.com/uk/Event/Japan_earthquake2 Japan quake
rips through commodities, energy: 
http://link.reuters.com/bum58r 
                                
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
                                
 At one point, Japanese stocks plunged more than 14 percent,
heading for their biggest drop since 1987 as concerns grew over
the economic impact of the unfolding disaster [.T]
                                
 Oil demand from Japan, the world's third-largest user, is
likely to decline in the short term as manufacturing and
transport stall but could then rise as the country seeks to
replace nuclear with oil-fired power during reconstruction.
                                
 The International Energy Agency (IEA) said on Tuesday global
oil demand was likely to be lower than previously forecast in
2011 as a result of a price shock and trimmed its forecast by
10,000 barrels to 1.44 million barrels per day. [ID:nWLA5303]
                                
 
                                
 SAUDI TROOPS IN BAHRAIN
                                
 Oil markets were also keeping a close eye on developments in
the Middle East where Bahrain declared martial law on Tuesday, a
day after Saudi forces arrived in the Sunni-ruled kingdom to
help restore calm following weeks of protests by the island's
Shi'ite Muslim majority.
                                
 Opponents of Bahrain's Sunni ruling family called the move a
declaration of war, while Iran denounced it as unacceptable and
the United States urged its nationals to leave the island, which
is home to the U.S. Navy's Fifth Fleet.
                                
 "The oil market is eyeing both developments in the Middle
East and in Japan," said Harry Tchilinguirian, head of commodity
markets strategy at BNP Paribas.
                                
 "While the tensions in the Middle East represent upside risk
to oil prices, the disruption to activity in Japan, and
regionally through its trading ties with China, is leading oil
prices lower for now." 
  <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^  
Reuters Global Oil Forum will host an interactive Q+A with IHS
Global Insight Middle East specialist Samuel Ciszuk from 1530
GMT (1130 EDT) on Tuesday to discuss the political outlook for
the oil market. To visit Reuters Global Oil Forum:  
  rmchat://room/thomsreuters.com/Global_Oil_Forum  
                                
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
                                
 In Libya, Muammar Gaddafi's jets bombed rebels on Monday in
a counter-offensive that has pushed them back 100 miles (160 km)
in a week, far outpacing diplomatic efforts to impose a no-fly
zone to help the insurgents. [ID:nLDE72D26K]
                                
 On the data front, markets were looking towards weekly U.S.
inventory numbers from industry group American Petroleum
Institute. A Reuters poll indicated U.S. crude oil stockpiles
probably rose by 1.8 million barrels last week. [EIA/S]
(Additional reporting by Alejandro Barbajosa and Ikuko Kurahone;
editing by Keiron Henderson)