* U.S. API data shows fall in crude, gasoline stocks
* Technicals show Brent to rise towards $120
* Coming Up: EIA weekly stocks, 1530 GMT
By Florence Tan
SINGAPORE, March 1 (Reuters) - Oil extended gains on Wednesday after settling at near 2-1/2 year highs as tension in Libya ratcheted up, spurring fears that other producers in the Middle East and North Africa may face similar revolts while crude and gasoline stocks unexpectedly fell in the world's top oil importer, the United States.
Libya could descend into civil war unless Muammar Gaddafi quits, the United States said on Tuesday, as pressure intensified on the longtime leader after news of Western military preparations.
"If it continues to spread, Middle East tensions may reach a point where a war could start and that could ignite an incredible rally (in oil prices)," said Ryoma Furumi, a commodities sales manager at Newedge Japan.
Brent crude for April delivery rose 61 cents to $116.03 a barrel by 0207 GMT. The contract settled up $3.62 or 3.24 percent at $115.42 a barrel on Tuesday, its highest close since August 2008.
U.S. crude for April delivery rose 67 cents to $100.30 a barrel after hitting an intraday high of $100.64.
Oil fields in Libya could suffer prolonged outages if fighting breaks out and damages infrastructure, analysts said.
Libya has cut almost half of its 1.6 million barrels per day (bpd) of output due to the departure of oil workers, while its oil installations are undamaged, the chairman of Libya's National Oil Corporation said.
Two Greek tankers left the Libyan port of Es Sider on Tuesday although concerns about potential violations of recently imposed U.S. sanctions against Libya left a cargo sitting off the coast of Texas and Louisiana in the U.S.
And the market is wary of the spread of similar pro-democracy revolts in the Middle East which holds more than 60 percent of the world's reserves.
"As long as the Middle East tensions continue, the fear is that there may be supply disruption," Furumi said.
Reports of clashes between the government and protesters in Yemen, Oman, Iran raised jitters among oil investors, causing oil prices to spike last week.
Saudi Arabia has ramped up production to cover a drop in Libyan exports, but doubts on its spare capacity remained.
"There would be a point when Saudi Arabia would not be able to cover (supply) for other countries," Furumi said.
STRONG U.S. DEMAND
Oil also received a boost from a surprise fall in U.S. crude inventories on lower imports while gasoline stockpiles were down sharply, industry data showed.
A Reuters poll forecast that crude inventories rose 700,000 barrels, distillate stockpiles fell 1.2 million barrels and gasoline supplies dipped 400,000 barrels.
"The truly bullish figures though were in demand - with implied distillate demand at 4.705 million bpd and implied demand in gasoline coming in at the blistering pace of 10.172 million bpd," Peter Beutel, president of U.S. trading advisory Cameron Hanover said in a March 1 note.
U.S. retail gasoline demand rose 3.1 percent in the latest week despite a sharp jump in pump prices as warmer weather boosted use of the fuel, MasterCard Advisors' SpendingPulse report showed.
However, Newedge's Furumi said consumers are likely to feel the pinch and cut usage if oil prices rise further. (Editing by Ed Lane)