Oil price spikes to 2.5 year-high on Libya unrest

New York's main contract, light sweet crude for delivery in April, hit $106.95 a barrel -- the highest level since September 2008.

It later stood at $105.67, up $1.25 compared with Friday's close.

In London, Brent North Sea crude for April rose 88 cents to $116.85.

"The unrest in Libya has pushed the price of oil up to a 2.5-year high," Commerzbank analysts said in a research note on Monday.

"We believe a swift return to 'normality' is unlikely and have therefore raised our oil price forecast for the second quarter to $120 a barrel. Only when the supply risks ease should the price of oil drop below the $100 a barrel mark again."

Heavy fighting continued in Libya as forces loyal to leader Moamer Kadhafi battled rebels for control of the country's key cities and oil ports.

"Oil prices continue to be on the uptrend primarily due to the deepening conflict in Libya and concerns about the protests spreading to other parts of the Middle East's oil-producing region," said Victor Shum at international energy consultants Purvin and Gertz.

"Concerns over oil supply disruptions in the Middle East and North Africa continue to drive oil prices," the Singapore-based energy expert told AFP.

Libya is the fourth biggest oil exporter in Africa after Nigeria, Algeria and Angola, producing around 1.8 million barrels a day, with reserves of 42 billion barrels.

The bulk of its oil production is exported to Europe, according to the International Energy Agency.

But Libya's violent upheaval will not lead to a shortage of oil on the global market because its production can be made up for in other countries, a senior executive at Repsol, Spain's largest oil group, said Monday.

"The world consumes 86 million barrels of oil per day and Libya contributes about two million barrels per day," Repsol's director general of upstream activities, Nemesio Fernandez-Cuesta, said in an interview published in the business daily Cinco Dias.

"But the amount of remaining global capacity is around four million barrels, mostly in Saudi Arabia. Therefore, supposing that all the Libyan production did not go to the market, that production could be replaced.

"There should not be a problem of shortage," he added.

The White House on Sunday said it had not ruled out tapping US strategic oil reserves to counter the sharp rise in crude prices.

"Well, we're looking at the options. The issue of the reserves is one we're considering," White House chief of staff William Daley told NBC.

"There's a bunch of factors that have to be looked at and it is just not the price" but also uncertainty stemming from unrest in the oil-rich Middle East and North Africa, he stressed.

Daley said President Barack Obama was "extremely concerned" about the rising price of oil and its impact on the struggling US economy.