* Libyan refinery shut, airstrike hits oil town
* US crude at Cushing hits record 40.26 million barrels
* Algeria says OPEC would respond to any real shortage
* Coming Up: U.S. jobless claims, 8:30 a.m. EST Thursday
(Updates market activity, prices, details)
By Gene Ramos
NEW YORK, March 9 (Reuters) - Brent oil prices rebounded
towards $116 a barrel on Wednesday as intense fighting in Libya
stoked more supply worries and U.S. crude fell as inventories
rose sharply, widening Brent's premium against U.S. crude.
Brent crude for April delivery <LCOJ1> settled $2.88 higher
at $115.94 a barrel, having earlier hit $116.18.
U.S. April crude <CLJ1> closed at $104.38 a barrel, down 64
cents, after hitting an early high of $105.92.
Brent crude's premium over U.S. benchmark West Texas
Intermediate crude <CL-LCO1=R> widened to $11.56, from $8.04 at
the close on Tuesday. That was a gain of $3.52, or 44 percent,
the biggest single-day percentage gain of Brent over U.S. crude
since Nov. 15.
Muammar Gaddafi's forces struck an oil pipeline leading to
the Es Sider town and dropped bombs on storage tanks in the Ras
Lanuf oil terminal area in the eastern section of Libya that is
rebel-controlled. []
Libyan state television blamed the explosions on "al
Qaeda-backed" armed elements.
Rebels said they had retaken the main square of the western
city of Zawiyah after pro-Gaddafi forces took control of it
earlier in the day. The fighting has led to the closure of one
of Libya's biggest refineries there. []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Reuters Insider telephone interview with correspondent on
the front line in Libya: http://link.reuters.com/qys48r
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HIGHER U.S. STOCKPILES
U.S. crude prices weakened after data from the U.S. Energy
Information Administration showed crude inventories rose 2.51
million barrels last week, dwarfing the forecast for an
increase of just 400,000 barrels in a Reuters poll. []
More telling for U.S. crude, crude stocks at the key
delivery hub in Cushing, Oklahoma, soared 1.69 million barrels
to a record 40.26 million barrels.
But losses for U.S. crude were limited as the weekly data
showed drawdowns for gasoline and distillate inventories were
bigger than expected, reflecting improving demand.
U.S. gasoline for April <RBJ1> jumped more than 8 cents to
close at $3.0272 a gallon, while April heating oil <HOJ1>
gained nearly 6 cents to $3.0707 a gallon, both near 2-1/2-year
highs.
PROLONGED STRUGGLE?
Perception of prolonged trouble in Libya was driving the
rally in oil prices, said Christopher Bellew, an oil trader at
Bache Commodities in London.
"As the outlook for Western intervention looks less likely
-- which would bring things to a quick conclusion -- then we
are looking at a prolonged struggle," he said.
Confirming previous non-Libyan estimates, Shokri Ghanem,
chairman of Libya's National Oil Corp, told a news conference
in Tripoli that production has been cut to about half a million
barrels per day, from 1.6 million bpd, as many foreign and
local workers have left oil fields. []
Libyan oil trade has been paralyzed as banks decline to
clear payments in dollars due to U.S. sanctions, though
Austrian energy group OMV said it had been buying small amounts
of Libyan crude oil and would continue to do so.
NATO Secretary-General Anders Fogh Rasmussen said the
alliance was not looking to intervene in Libya, but its
military was ready to respond at short notice. []
Oil prices fell on Tuesday after Kuwait's oil minister said
OPEC was considering raising output due to the Libyan outage.
But an OPEC delegate said on Wednesday that the group saw
no need for an emergency meeting to discuss raising output.
[]
Leading OPEC producer Saudi Arabia is already pumping more
oil -- up to 9 million barrels per day -- to keep supplies
available if needed.
Saudi Shi'ites staged another small protest in the
kingdom's Eastern province, defying a ban on demonstrations,
but Foreign Minister Prince Saud al-Faisal said dialogue, not
protest, was the best way to bring about change.
[] []
OPEC member Algeria's oil minister said on Wednesday he was
confident that potential domestic unrest in Algeria or Saudi
Arabia would not disrupt oil exports. []
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FACTBOX on emergency oil stockpiles: []
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
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(Additional reporting by Robert Gibbons, David Sheppard and
Janet McGurty in New York; Claire Milhench in London; Alejandro
Barbajosa in Singapore; Editing by Marguerita Choy and Walter
Bagley)
