Oil was steady on Monday with Brent stabilizing above $115 as investors looked to Middle East geopolitics to maintain near-record long speculative positions, while flaring unrest over the weekend was limited to minor crude exporters Syria and Yemen.
Brent crude for May slipped 8 cents to $115.51 a barrel by 2:13 a.m. ET, about $4 from a 2-1/2-year high near $120 reached last month and up 22 percent this year. U.S. crude shed 13 cents to $105.27.
Western-led military intervention in Libya's civil war prompted speculators to raise their bets on higher prices by 6 percent last week, before rebels took back a series of towns including oil terminals over the weekend.
Syria deployed the army to the country's main port also over the weekend in an attempt to rein in spreading protests across the country, while in Yemen talks stalled between the government and opposition.
Investors are taking a wait-and-see attitude for the next turn of events in the Middle East, said Natalie Robertson, a commodities analyst at ANZ in Melbourne.
Even if there is an increase in exports from Libya, the long-term implications of unrest across the region will override that.
A senior Libyan rebel official said on Sunday Gulf oil producer Qatar had agreed to market crude oil produced from east Libyan fields that are no longer in the control of Muammar Gaddafi.
Output from eastern Libya oil fields controlled by rebels was running at about 100,000 to 130,000 barrels per day (bpd), which could be increased to 300,000 bpd, Ali Tarhouni, a rebel official in charge of economic, financial and oil matters, said on Sunday. Libya was pumping about 1.6 million bpd before the rebellion started.
The rebels' advance over the weekend put them back in control of all the main oil terminals in the eastern half of Libya, namely Es Sider, Ras Lanuf, Brega, Zueitina and Tobruk. On Monday, they also claimed to have taken control of Sirte, Gaddafi's hometown.
Portugal's political and financial crisis was capping gains in the oil market, while a state German election rout for the ruling conservative party sent the euro lower on Monday.
European leaders agreed a new package of anti-crisis measures at a two-day summit, but were forced to delay increasing their rescue fund and acknowledged they faced new threats from a government collapse in Portugal.
The unrest in the Middle East is providing support, but the Portugal crisis is capping gains, Robertson from ANZ said.
Investors will hold onto their long position until something of significance occurs in the market. If they have fully priced in the unrest, the market is susceptible to drops due to profit taking.
Also seeking financial stability, China, the world's second-largest oil user, will be able to cap inflation below the full-year target of a 4 percent average rise in prices, the People's Daily said in a front-page editorial published on Monday.
Brent last week posted its third straight weekly gain, up 1.5 percent, as investors remained focused on the deteriorating geopolitical outlook in the Middle East and North Africa, which together pump more than a third of the world's oil.
Dozens have died in pro-democracy demonstrations in the southern Syrian city of Deraa and nearby Sanamein as well as Latakia in the northwest, Damascus and other towns over the last week. In Yemen, clashes erupted over the weekend between the army and militants in the south.
Bahrain's largest Shi'ite opposition group Wefaq has accepted Kuwait as a mediator with the island nation's government to end a political crisis gripping the tiny kingdom, which lies less than 100 kilometers from the hub of the Saudi oil industry.
Saudi Arabian King Abdullah earlier this month announced $93 billion in social handouts, the second benefits package to be unveiled within a month as the kingdom attempts to contain discontent, especially from Shi'ites in the east of the country, where the world's biggest oil reserves are located.
That's a reason oil is trending higher -- simply OPEC is demanding a higher price for its oil, and the developments in the Middle East are exacerbating that trend by pushing some producers like Saudi Arabia to expand their expenditures at rapid rates, Francisco Blanch, Bank of America Merrill Lynch's global head of commodity research, told Reuters in Calgary.
The economy is squarely reliant on oil and becoming a lot more reliant because the unrest is forcing politicians in Saudi to start throwing money at the problem.
Speculators raised net-long positions on NYMEX crude by almost 16,000 to near 287,000 contracts in the week to March 22, data from the U.S. Commodity Futures Trading Commission showed on Friday, compared with an all-time high of almost 312,000 contracts two weeks earlier.
(With additional reporting by Jeffrey Jones in Calgary; Editing by Clarence Fernandez, Himani Sarkar)