* Gaddafi defiant, threatens more action against protests
* Some 13 pct of Libyan crude production shut in
* Eastern Libya breaks free from Gaddafi's control
* Saudi stops short of adding oil to market
(Recasts, updates prices, market activity)
By David Sheppard
NEW YORK, Feb 22 (Reuters) - Oil held near 2-1/2 year highs
on Tuesday, with worries about turmoil in Libya that sent
prices soaring the previous session eased by expectations that
OPEC and the International Energy Agency could meet any
shortfall in oil supplies.
At least three international oil companies have halted
production in Libya, which pumps nearly 2 percent of world
output. Some companies have been pulling employees and their
families out of Africa's third-largest producer, though others
say they are keeping oil flowing there. []
Oil prices surged as much as 6 percent on Monday, taking
Brent crude in London to almost $109 a barrel at one point for
the first time since 2008. Prices remained strong on Tuesday,
but closer to $106.
"We've lost 300,000 bpd of production (in Libya) already
with the potential for further cuts to output and exports,"
said Andy Lebow, a trader at MF Global in New York.
"The major underlying fear in the market is that these
protests spread in the region to even larger producers like
Saudi Arabia. While that might not look likely right now, even
a hint of real problems there could send prices vertical."
Brent crude for April delivery <LCOc1> rose 4 cents to
settle at $105.78 a barrel, the highest close since September
2008 but off earlier highs of $108.57. Brent hit a 2-1/2 year
high of $108.70 a barrel on Monday.
U.S. crude <CLc1> for March delivery, which expired on
Tuesday, rose to $93.57 a barrel, after touching $94.49, the
highest since October 2008. It was up $7.37 a barrel from
Friday; although the market traded on Monday, it did not print
an official settlement price due to a holiday.
The more actively traded April contract gained $5.71 from
Friday to trade at $95.42 a barrel.
In a defiant speech on Tuesday, Libyan leader Muammar
Gaddafi refused to step aside and threatened tougher action
against protests, as rebel troops said eastern regions,
including major oilfields, had broken free from his rule.
Two more oil companies, Italy's ENI <ENI.MI> and Spain's
Repsol <REP.MC>, halted output, cutting some 13 percent of its
1.6 million barrels per day (bpd) of crude oil production. U.S.
companies said their output was still flowing. []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Libyan oil map: http://r.reuters.com/jem28r
Production and export graphics:
http://r.reuters.com/qun28r
FACTBOX-Libya oil output,exports,customers []
Insider show on crude: http://link.reuters.com/tuq28r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
BRACED FOR VOLATILITY
Lebow said that traders were not buying oil at the same
rate as Monday, but few wanted to go short with so much
uncertainty in the Middle East.
Option investors bet on higher crude prices and more
volatility, with the Crude Oil Volatility Index <.OVX>, known
as the "Oil VIX," surging more than 22 percent.
But oil futures pared gains after reassurances on supply
from Saudi Arabia, the largest producer in the Organization of
the Petroleum Exporting Countries (OPEC), and from an official
from the International Energy Agency (IEA), who reiterated that
the agency stood ready to address any real disruptions by
tapping member stockpiles.
Saudi Arabian Oil Minister Ali al-Naimi, speaking on the
sidelines of the International Energy Forum in Riyadh, said the
group would meet any real supply shortages, though he stopped
short of announcing more production immediately, saying prices
were driven primarily by speculation and fear. []
"What I would like you to convey to the market: right now
there is absolutely no shortage of supply," Naimi told a news
conference.
"I think this is a situation of fear, concern which will be
very short term and will have no long range effect," adding he
did not see prices spiking towards $150 a barrel as they did in
2008, before crashing as the economic crisis took hold.
Spare capacity in the first-half of 2008 was only around 2
million bpd, far lower than the estimated 5-6 million bpd now
that could be called upon to meet any disruptions.
The IEA rarely opens the taps but members hold 1.6 billion
barrels of emergency oil stocks. They were last tapped in 2005
after Hurricane Katrina crippled U.S. Gulf oil operations.
DISRUPTED OPERATIONS
Wintershall, the oil and gas exploration arm of
Germanchemicals company BASF <BASF.DE>, said Monday it was
temporarily shutting down its 100,000 bpd production
partnership with Libya's National Oil Corporation.
[]
Oil product traders operating in the Mediterranean also
said exports from Libya were severely disrupted on Tuesday, but
some traders said cargoes were continuing to load.
[]
(Reporting by David Sheppard, Matthew Robinson and Gene Ramos
in New York; Claire Milhench in London and Francis Kan in
Singapore; Editing by David Gregorio and Sofina Mirza-Reid)
