Brent off 2-1/2 year highs as Saudis lift output

Brent crude rose in volatile trade on Friday, holding above USD 112 a barrel but below 2-1/2-year highs after top oil exporter Saudi Arabia raised output to calm fears of supply disruptions sparked by the uprising in Libya.

Saudi Arabia has boosted output more than 700,000 barrels per day, to a level exceeding 9 million bpd, a senior industry source familiar with Saudi production told Reuters.

Trading was volatile as investors worried about the worsening situation in Libya, where oil outages have risen to as high as three quarters of its 1.6 million bpd output.

A late bout of short-covering ahead of the weekend had kept prices higher, though still below early highs, traders said.

"I don't think many traders are comfortable being short over the weekend," said Tom Bentz, broker at Paribas Commodity Futures in New York.

Estimates of the supply loss could not be confirmed, however, with conditions unsettled with rebels fighting to wrest control of oilfields and terminals in eastern Libya from loyalists to leader Muammar Gaddafi.

"Fears that the unrest in Libya could turn into a civil war and wipe out its oil production have been offset by assurances from Saudi Arabia that it is raising output," said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

On Thursday, the Libyan output disruptions pushed Brent to almost USD 120 and US crude to more than USD 103, with Brent shooting ahead as more of Libya's oil exports go to European refiners than to those in the United States.

In London, Brent crude futures for April were up 82 cents at USD 112.18 a barrel by 2 pm EST (1900 GMT) on Friday, off the session high of USD 113.91. They touched USD 119.79 on Thursday, the priciest since August 2008.

U.S. crude futures for April rose 82 cents to USD 98.10, off a USD 99.20 high touched earlier in the day. They hit USD 103.41 on Thursday, the highest since September 2008.

Brent's premium against US crude rose above USD 15 a barrel from USD 14 on Thursday, when the Brent spread against US benchmark West Texas Intermediate rocketed to a record USD 16.91.

US crude oil was helped by data showing consumer confidence hit a three-year high in February, suggesting the economy remained on solid footing despite soaring gasoline prices, according to the latest ThomsonReuters/University of Michigan survey.

That optimism was tempered by the latest reading of the fourth quarter 2010 economic growth, which showed that the US economy grew more slowly than expected.

(Source: http://www.moneycontrol.com/news/commodities/brent-off-2-12-year-highs-as-saudis-lift-output_526233.html)