* Opposition, security forces clash in Tehran - websites
* Saudi Arabia denies sending tanks to Bahrain
* APIs show 1.1 mln crude draw; big 4.9 mln mogas drop
(Recasts, updates prices, market activity)
By Robert Gibbons
NEW YORK, March 1 (Reuters) - Brent crude oil surged as
much as $5 on Tuesday and posted its highest closing price in
2-1/2 years, as protests across North Africa and the Middle
East stirred concerns about supplies from top Gulf OPEC
producers.
News of a detained Shi-ite cleric in Saudi Arabia and
clashes in Iran triggered the rally, and gains accelerated as
traders worried that the world's biggest crude exporters could
be hit by unrest like that which has halved Libya's oil
production.
Brent crude futures for April <LCOc1> rose $3.62 to settle
at $115.42 a barrel, the highest finish since Aug. 27, 2008.
U.S. crude <CLc1> rose $2.66 to settle at $99.63 a barrel, its
highest settlement since Sept. 30, 2008.
Brent extended gains in post-settlement trade, rising at
one point by more than $5 to a high of $116.76 following U.S.
industry data showing an unexpected decline in weekly U.S.
crude inventories and a shocking 4.9 million barrel drop in
gasoline stocks.
In Libya, where Muammar Gaddafi remained defiant in the
face of increasing international pressure and rebel offensives,
the top oil official told Reuters the country's 1.6 million
barrels per day (bpd) of production was halved although oil
installations were undamaged.
The United States warned that the OPEC member faced the
danger of civil war if Gaddafi refused to quit. Many analysts
have warned it could be months bofore production is restored,
oil traders were beginning to shift their focus to even larger
risks in the Gulf.
SAUDI, IRAN RUMBLINGS
Human rights activists told Reuters Saudi authorities had
detained a Shi'ite cleric, fueling fears of sectarian conflict
in the world's top oil exporter. The news spooked both oil and
equity markets. []
"The Saudis had seemed to be walking the tightrope and
avoiding problems, but the cleric story had people worried that
it signaled problems there," said Robert Yawger, senior vice
president, energy futures at MF Global in New York.
Traders were also unsettled by a report in an Egyptian
newspaper -- quickly denied -- that Saudi Arabia had sent tanks
to Bahrain to try to quell protests.
In Iran, pro-reform websites reported clashes between
anti-government protesters and security forces in Tehran. This
fed fears of that another top oil supplier could be affected by
the spread of turmoil that toppled leaders in Egypt and
Tunisia, and spread to Oman and Bahrain.
"We're now at the point where a $1-$2 move is just a normal
fluctuation," said Peter Beutel, president at Cameron Hanover
in New Canaan, Connecticut.
"At this point, we're rife with rumors and when any emerge
from the 'Petroleum Gulf' we're going to see a jump. If there's
some truth in it, the move will be $5-$6 rather than $1-$2."
In Oman the army wounded at least one person as it moved to
disperse protesters near the northern port of Sohar.
VOLUMES SUBDUED
The cascading unrest has driven prices up nearly 14 percent
in seven days, the biggest such rise since October 2009.
Trading activity was subdued for a second day, suggesting
some of the panicked, volatile trade of last week had given way
to a more measured reaction in an uncertain market grappling
with the most serious geopolitical risks since the U.S.-led
invasion of Iraq.
"The low volume indicates sellers have backed away from
these markets because no one can assert when or how this
(turmoil) will end," said Tim Evans, energy analyst for Citi
Futures Perspective in New York.
U.S. NYMEX crude trading volume was about 25 percent below
the 30-day average at around 670,000 lots.
Brent's premium to its U.S. counterpart rose to $15.82 a
barrel, up from Monday but off last week's record $16.91.
Brent's price rise has been stronger because Europe is more
vulnerable to supply disruptions from Libya and the region.
FUNDAMENTALS SET ASIDE
Prices also got a boost after the settlement from American
Petroleum Institute (API) data that showed total U.S. crude
inventories fell by 1.1 million barrels and gasoline stocks
dropped by 4.7 million barrels.
The draw in crude stocks, which countered analyst forecasts
for a 700,000 barrel build, came as U.S. crude imports fell by
589,000 bpd. Fog had delayed some tankers entering the Houston
shipping channel last week. U.S. Gulf Coast stocks fell by 4.7
million barrels.[]
U.S. equity markets dropped on fears the jump in oil prices
could choke off economic recovery, offsetting a positive
reading on manufacturing.
The dollar recovered from a 3-1/2-month low against a
currency basket hit ahead of Federal Reserve Chairman Ben
Bernanke's appearance before Congress as the euro again failed
to breach resistance at its 2011 high.
Bernanke said the recent surge in oil prices was unlikely
to have a big impact on the U.S. economy, but could lead to
weaker growth and higher inflation if sustained.
(Additional reporting by Gene Ramos and David Sheppard in New
York, Zaida Espana in London and Florence Tan in Singapore;
Editing by Dale Hudson and David Gregorio)
