* Saudi reassures it has met shortfall from Libya outage
* U.S. crude stockpiles likely rose for 7th straight week
* Technicals show Brent oil to consolidate
* Coming Up: U.S. API weekly stocks, 2130 GMT
By Florence Tan
SINGAPORE, March 1 (Reuters) - Brent crude held steady near
$112 a barrel on Tuesday as investors remained cautious about
Middle East supplies even as Saudi Arabia ramped up production
to cover a drop in Libyan exports.
Chinese manufacturing growth slowed in February to a
six-month low for the world's No. 2 oil importer, while U.S.
crude oil inventories likely increased for the seventh
consecutive week last week on higher imports, putting pressure
on prices.
Brent futures for April rose 21 cents to $112.01 a
barrel by 0203 GMT after finishing 10.68 percent higher in
February, its biggest monthly percentage rise since May 2009.
U.S. crude rose 9 cents to $97.06 a barrel.
"We need to pay attention to the situation in Libya," said
Yuichiro Sakaki, a Tokyo-based trader at Mizuho Securities.
"It may be a risk factor if (the outages) continue for a
long time."
Crude oil shipments from Libya are at a virtual standstill
as reduced production and bad weather hamper exports from the
world's 12th-largest producer, shipping sources said.
Bank of America Merrill Lynch said Libya's oil
infrastructure on the eastern side of the country could be prone
to attacks, "creating the risk of a prolonged output loss."
The bank added that the oil market's ability to deal with
further unrest in the Middle East remained very limited.
Libya produces 1.6 million barrels per day of mainly light
sweet crude and Saudi Arabia has said all demand for extra oil
have been met.
"Saudi Arabia appears to be cranking up supplies to fill the
gap, but it is unclear at this point whether it will fully
offset the supply loss," JPMorgan analysts led by Lawrence
Eagles said in a Feb. 28 note.
CHINA MANUFACTURING SLOWS
Chinese manufacturing growth slowed in February to a
six-month low, according to an official survey, as the
government's sustained campaign to tame inflation weighed on
industrial activity.
Although China's economic growth is expected to slow
slightly this year, the world's second largest oil consumer
still has a strong demand for crude and products which is
bullish for the market, Mizuho's Sakaki said.
Soaring global commodity costs complicated the task of
monetary tightening in China, pushing a gauge of industrial
input prices to a three-month high in the country's official
purchasing managers' index.
Oil price spikes could cause dislocations to the world
economy, JPMorgan analysts warned.
"A steep rise in oil prices that is caused by a supply loss
is likely to be more damaging than one that is driven by robust
demand," the bank said.
However, a senior World bank economist said a sustained
period of higher oil prices would significantly affect
developing economies but is unlikely to derail their strong
recovery since the global financial crisis.
Separately, the IMF warned extended higher oil prices would
hit world growth.
In the U.S., crude stocks are expected to rise 1.2 million
barrels last week while inventories for oil products are likely
to fall, a preliminary Reuters poll showed.
"While further escalation of tensions could trigger renewed
price spikes, we think oil is expensive from a fundamental
perspective," Credit Suisse analysts said in a March 1 note.
"Hence, we expect oil prices to pull back to pre-turmoil
levels once geopolitical risks subside."
(Editing by Ed Lane)
