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Updated Tuesday, March 22, 2011 11:55 pm TWN, By Jessica Donati, Reuters

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Oil rises US$2 after strikes against Libya

LONDON -- Oil prices rose by US$2 a barrel on Monday as a wave of U.N.-mandated airstrikes on Libya and proliferating unrest in the Middle East fanned concerns about oil supply from the region.

Brent crude for May was up US$2.21 to US$116.14 a barrel by 1044 GMT, while U.S. crude for April gained US$2.13 at US$103.20 a barrel.

“With the nature of the external military involvement becoming clearer, there is a further escalation of the situation, and the damage to infrastructure might be larger, keeping Libya out of the oil market for longer,” said Amrita Sen, an analyst at Barclays Capital.

Headlines from Japan's troubled nuclear reactor revived worries about the country's economy as authorities warned a turning point had not yet been reached, balancing against bullish news from the Middle East.

“The market is very headline driven and we don't know what the next headline from Libya or Japan will be,” said Olivier Jakob, an oil analyst at Petromatrix.

U.N.-backed strikes led by the United States, the UK and France raised the stakes in a civil war that has cut Libya's oil output to less than a quarter of the previous 1.6 million barrels per day (bpd), nearly paralyzing shipments abroad from what used to be the world's 12th-largest crude exporter.

Gadhafi's control of oil infrastructure in the long term could mean deals with foreign oil companies are reshaped in favor of countries not participating in the attacks.

Libya is considering offering oil block contracts directly to China, India and other nations it sees as friends, Libya's top oil official said on Saturday, instead of open bidding processes.

China, India, Russia, Brazil and Germany were the five nations that abstained in last week's U.N. vote to authorize the use of force against Gadhafi. The other 10 members of the Security Council voted in favor.

The weekend's military intervention to protect civilians caught up in a one-month-old revolt against Gadhafi drew criticism from Arab League chief Amr Moussa, who questioned the need for a heavy bombardment he said had killed many civilians.

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