UPDATE 13-Oil slumps on Japan crisis, Mideast clashes eyed

                                
 * Japan's reactor woes send oil prices lower
                                
 * Bahrain clashes, Libya fighting helps oil pare losses
                                
 * Coming up: API oil data at 4:30 p.m. EDT Tuesday
                                
 (Recasts, updates with settlement prices, details
throughout)
                                
 By Robert Gibbons
                                
 NEW YORK, March 15 (Reuters) - Brent crude prices on
Tuesday tumbled 4.5 percent, its biggest drop in over 13
months, as Japan's escalating nuclear reactor crisis sparked
risk aversion even as clashes in Bahrain and Libya briefly
pulled prices off lows.
                                
 U.S. crude prices fell nearly 4 percent as oil demand in
Japan looked to be curbed for a more prolonged period as the
country faced a potential catastrophe after a nuclear power
plant exploded and released low levels of radiation.
[ID:nL3E7EF3II]
                                
 Violent clashes in Bahrain and fighting in Libya that saw
further gains by forces loyal to Muammar Gaddafi's government
against rebels caused a brief bounce well above lows.
[ID:nLDE71O2CH]
                                
 Brent crude futures for April delivery <LCOc1> settled at
$108.52 a barrel, dropping $5.15 or 4.5 percent, its biggest
percentage drop since Feb. 4, 2010. During the session, it fell
as low as $107.88, its lowest since Feb. 23.
                                
 U.S. crude futures for April delivery <CLc1> fell $4.01 to
settle at $97.02 a barrel. The intraday low of $96.71 was the
lowest price since March 1, when prices fell to $96.31.
                                
 "It looks like the Japanese economy may be affected for a
longer period than was thought last week," said Gene McGillian,
analyst at Tradition Energy in Stamford, Connecticut.
                                
 "And there was record length and that made the market even
more vulnerable to the downside."
                                
 McGillian was referring to the record net-long positions in
U.S. crude as of last Tuesday reported by the U.S. Commodities
Futures Trading Commission on Friday. [ID:nN25132195]
                                
 Total U.S. crude trading volume at nearly 772,000 lots was
15 percent below the 30-day average.
                                
 Oil prices held losses after the U.S. Federal Reserve
released a statement saying the U.S. recovery was gaining
traction and that rising inflation pressures will probably
prove transitory. [ID:nFEDAHEAD]
                                
 Tuesday's oil price slide came ahead of weekly oil
inventory reports, with analysts surveyed by Reuters expecting
that U.S. crude stocks rose last week. [EIA/S]
                                
 MARKETS BUFFETED BY JAPAN'S WOES
                                
 Commodities and equities prices fell after an explosion on
Monday at the Fukushima Daiichi unit 2 in Japan, a blast that
the U.N.'s International Atomic Energy Agency said "may have
affected the integrity of its primary containment vessel."
[ID:nLDE72E209] [MKTS/GLOB] [.T] [.N]
                                
 Japan's crude oil demand, the world's No. 3 consumer, was
expected to decline in the short term due to shut refineries
and stalled economic activity.
                                
 But an early expectation that distillate imports would soon
spike in order to substitute nuclear plant generation with
oil-fired power seemed to fade some on Tuesday.
                                
 U.S. benchmark heating oil futures <HOc1> slumped more than
3.5 percent and the crack spread, or profit margin for
refiners, dipped 65 cents to $26.84 a barrel <CL-HO=R> after
both posted gains on Monday.
                                
 Ahead of a seasonal specification shift from winter grade
fuel, U.S. gasoline futures tumbled 5.3 percent, with the crack
spread sliding $2.62 to $20.52 a barrel <RB-CL=R>.
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
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
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 BAHRAIN CLASHES, LIBYAN BATTLES
                                
 Oil investors kept a close eye on developments in Bahrain
where martial law was declared a day after Saudi forces arrived
in the Sunni-ruled kingdom following weeks of protests by the
island's Shi'ite Muslim majority. [ID:nLDE72E02N]
                                
 Violence broke out and two men were killed and more than
200 people wounded in clashes, a hospital source said.
[ID:nLDE72E264]
                                
 Muammar Gaddafi's forces continued to make advances against
rebels in Libya while world powers failed to agree to push for
a no-fly zone. [ID:nLDE72E00R]
                                
 Libya's oil output will take some time to return to normal,
the head of the Libya's National Oil Corporation said, because
some installations were damaged in the fighting. [ID:nWLA5371]
 (Additional reporting by Nia Williams and Ikuko Kurahone in
London and Alejandro Barbajosa in Singapore; Editing by
Marguerita Choy and Sofina Mirza-Reid)