(Updates prices)
* World's oil supply to tighten if unrest spreads in MidEast
* Technicals show Brent crude to rise to $117.70
* Coming Up: Chicago PMI, 1445 GMT
By Florence Tan
SINGAPORE, Feb 28 (Reuters) - Brent crude rose more than $2
a barrel to a high of $114.50 on Monday as concern persisted
about security of supply from the Middle East and North Africa
even after top exporter Saudi Arabia boosted supply to meet the
shortfall caused by a cut in exports from Libya.
Violent revolt in Libya has shut down down as much as
three-quarters of its output, according to some estimates. As
protests have intensified and spread through the Arab world,
investors fear any impact on output from Saudi Arabia.
Brent crude was up $1.79 113.92 a barrel by 0535
GMT. U.S. crude rose $1.45 at $99.33 a barrel.
Both benchmarks posted their highest weekly close in 2-1/2
years last week.
"There is the continued threat that conflicts will spread in
the region that produces a large amount of oil in the world,"
said Ben Westmore, a commodities economist at the National
Australia Bank.
"There's been a bit of a contagion already," he said.
The impact on oil supply would be severe if conflict were to
spread to Iran, Kuwait and especially to Saudi Arabia, he said.
Saudi Arabia is the only producer with significant spare
capacity that can be quickly started to deal with supply
outages. Without access to that oil the world has little slack
in the global supply system to deal with disruption.
The kingdom is using that capacity to plug the Libyan
deficit and has boosted output to a level exceeding 9 million
bpd, a senior industry source familiar with Saudi production
told Reuters. That would be the highest since
Saudi pumped around 8.3 million bpd in January, according to a
Reuters survey, although some estimates are higher and one
consultant pegged output last month 8.9 million bpd.
In Libya, armed rebels prepared for a counter-attack as the
country's leader Muammar Gaddafi defied calls to quit in the
hardest-fought of the Arab world's wave of uprisings so far.
On Sunday, police crushed protest in non-OPEC oil exporter
Oman following a wave of pro-democracy protests across the Arab
world.
Oman is the ninth largest producer in the Middle East and
North Africa, just after Libya, with a production of 865,000
bpd, according to JPMorgan.
The market is "definitely bracing for the worst" as it
remained unclear when the situation in Libya would stabilise,
Westmore said.
JPMorgan increased late on Friday its 2011 Brent oil
forecast to $108 a barrel, up from the previous $95, on tighter
supply after Libyan output losses.
It also raised its 2011 average forecast for WTI crude by
3.2 percent to $96 a barrel.
"The new 2011 price forecast maps a projected outcome within
a range of scenarios that could encompass the oil market over
the next 12 months - ranging from a rapid normalization of
geopolitical risk to the loss of output in a major oil
producer," JPMorgan said in a report on Friday.
Following spikes in oil prices last week, the International
Energy Agency has called on OPEC to draw on excess oil
production capacity if required while adding that it is also
ready to release emergency stocks when necessary.
But the response time meant that extra supplies would lag
disruption, prompting volatility and near-term price spikes,
Westmore said.
Iran's Oil Minister urged Saudi Arabia on Sunday to refrain
from taking a hasty decision on increasing its oil production
after the popular uprising in Libya, the official IRNA news
agency reported.
Traders were looking ahead to manufacturing data to be
released from the United States and China on Tuesday, Westmore
said.
(Editing by Ed Lane)
