* 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)
