UPDATE 10-Oil falls as OPEC mulls output boost, eyes Libya

                                
 * Kuwait says OPEC discussing output increase
                                
 * Brent premium over WTI falls below $9 from $17 last week
                                
 * Coming up: API oil data at 4:30 p.m. EST (2130 GMT)
 (Recasts, updates prices and market activity)
                                
 By Robert Gibbons
                                
 NEW YORK, March 8 (Reuters) - Oil prices fell on Tuesday
after Kuwait's oil minister said OPEC was considering the first
official production boost in more than two years to ease
anxiety about Libya's supply disruption and the potential for
other disruptions in the region.
                                
 The Organization of the Petroleum Exporting Countries has
not changed its official policy, though analysts have said the
producer group's output has informally risen for months and
Saudi Arabia has offered to help make up for Libya's shut
output, estimated at about 1 million barrels per day of its
normal 1.6 million bpd. [OPEC/O]
                                
 Brent crude futures for April delivery <LCOc1> fell $1.94
at $113.10 a barrel by 12:37 p.m. EST (1737 GMT), having fallen
as low as $112.13.
                                
 U.S. crude futures for April delivery <CLc1> fell 55 cents
to $104.89 a barrel, after posting a low of $103.33.
                                
 Brent's premium to the U.S. benchmark West Texas
Intermediate crude <CL-LCO1=R> fell $1.44 to $8.34 a barrel,
down from a peak of more than $17 last week. [ID:nLDE7271IQ]
                                
 "We are in consultations about a potential output
increase," Kuwait's Sheikh Ahmad al-Abdullah al-Sabah told
reporters. But he added that the group had taken no decision
yet to produce above existing output targets. [ID:nLDE72705O]
                                
 Saudi oil minister Ali Al-Naimi said world oil markets were
sufficiently supplied and the kingdom held 3.5 million bpd of
spare production capacity to meet any shortages. [ID:nWEA7207]
                                
 While acknowledging the discussions about production,
Algeria's oil minister said he sees no physical deficits in oil
markets and Iran's OPEC governor downplayed the discussions and
said there was no need for an output boost as consumer worries
over supply were mostly "psychological." [ID:nLDE7270Q8]
                                
 Investment bank Goldman Sachs raised its oil price forecast
and said it believed Saudi Arabia already had used up more of
its surplus capacity than is widely thought. [ID:nLDE7270QE]
                                
 U.S. crude prices will average $102 a barrel in 2011
because of the unrest in North Africa and the Middle East, the
U.S. Energy Information Administration said, raising the
forecast by $9 from its February outlook. [ID:nN08434794]
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 FACTBOX on emergency oil stockpiles:       [ID:nL3E7E40BY]
                                
 Graphics on U.S. strategic oil reserve, U.S. and other IEA
                                
 nations' reserves:          http://link.reuters.com/cah48r
                                
 Graphics showing:
                                
 Middle East unrest             http://r.reuters.com/nym77r
                                
 Oil price shocks               http://r.reuters.com/qes28r
                                
 Those most reliant on oil      http://r.reuters.com/dux28r
                                
 OECD commercial oil stocks  http://link.reuters.com/qyg48r
                                
 Brent and WTI open interest    http://r.reuters.com/cag48r
                                
 Graphic of U.S. oil stocks:    http://r.reuters.com/sup48r
                                
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 BATTLE FOR LIBYA
                                
 Libyan government forces attacked rebels with rockets,
tanks and warplanes on western and eastern fronts, intensifying
their offensive to crush the revolt against Muammar Gaddafi.
[ID:nLDE72701U]
                                
 Witnesses reported at least four airstrikes by Muammar
Gaddafi's forces on Ras Lanuf on Tuesday, fueling concerns the
country's oil infrastructure could suffer long-term damage in
the conflict. [ID:nLDE72718V]
                                
 "The market is now waiting for the next piece of news to
unfold," said Harry Tchilinguirian, head of commodity markets
strategy at BNP Paribas, who said $2 moves were not surprising
in such a volatile market.
                                
 "A turn for the worse for the market would be oil
infrastructure being hit as a result of the fighting. The
demise of the current regime or a more forceful statement from
OPEC followed by an increase in production would be significant
too."
                                
 U.S. OIL INVENTORY REPORTS
                                
 The industry group American Petroleum Institute will issue
its weekly oil inventory report at 4:30 p.m. EST (2130 GMT) on
Tuesday. The EIA's report of government data follows on
Wednesday, at 10:30 a.m. EST (1530 GMT).
                                
 A Reuters analyst survey on Monday yielded a forecast for
crude stocks to be up slightly, with distillate and gasoline
stocks expected to have fallen last week. [EIA/S]
 (Additional reporting by Nia Williams and Christopher Johnson
in London and Alejandro Barbajosa in Singapore; Editing by
Walter Bagley)