Oil pressured by Japan quake, off two wk lows

By @ibtimes on

Oil slipped on Monday on concerns over the economic impact from Japan's earthquake and tsunami, although prices were off two week lows, underpinned by continued unrest in oil rich North Africa and the Middle East.

ICE Brent crude was trading $1.17 lower at $112.67 a barrel by 1239 GMT (8:39 a.m. EDT), trimming an earlier loss to a two week low of $111.16. U.S. crude fell $1.49 to $99.67, after hitting an intraday low of $98.55.

Prices pushed off the lows after a report some 1,000 Saudi soldiers entered Bahrain early on Monday to protect government facilities following recent unrest by the country's Shi'ite Muslim majority, a Saudi official source said.

Bahrain, which lies off the coast of Saudi Arabia, called in forces from its Sunni neighbors to put down unrest by its Shi'ite Muslim majority after protesters overwhelmed police and blocked roads in a resurgence of mass protests seen last month.

Christopher Bellew with Bache Commodities said the unrest in oil rich North Africa and the Middle East would continue to provide support to oil prices.

With the continuing and arguably worsening unrest in the Middle East, I would expect the oil market to move higher again, he said.

Still, global markets remained under pressure due to the catastrophe in Japan, where oil demand from the world number three energy consumer, was expected to fall in the short to medium term as economic activity stalls following the quake.

Japanese stocks fell sharply as the impact on the Japanese economy from the massive earthquake on Friday is worrying. Asian shares were dragged lower and the trend has been to avert risks, including oil, analysts with Japan's Mizuho Corporate Bank said in its commodities research note.

Japan's Nikkei stock average <.N225> fell more than 6 percent, dragging global equities lower. Global commodities prices mostly fell. <.EU><.N>

Prime Minister Naoto Kan on Sunday said the country was facing its biggest disaster since the second world war. The earthquake and tsunami on Friday devastated a large part of northeast Japan, killing at least 10,000 people.

Nuclear power plants' coolant systems failed and two explosions hit the Fukushima nuclear plant. Operator Tokyo Electric Power Co <9501.T> was struggling to keep coolant water in one reactor core.

Many other nuclear plants and oil refineries have been shut. Ports and other infrastructure sustained severe damage.

Refined oil products and gas prices, however, were outperforming crude oil prices due to an expected increase in import demand in coming weeks and months from Japan to cover lost oil refining and nuclear power generation capacity.

Construction shares were up in Asia as northeast Japan was expected to need extensive reconstruction work.

In Libya, Muammar Gaddafi's troops battled rebel fighters for control of the strategic oil town of Brega, while France was stepping up efforts to persuade world powers to impose a no-fly zone over Libya.

More than half of Libya's 1.6 million barrels per day oil output has been shut in due to the unrest.

In Yemen, heavy gunfire was heard south of the capital on Monday and soldiers deployed in force in Sanaa itself, with a new wave of rallies reported across the country demanding that President Ali Abdullah Saleh quit. ]

(Reporting by Ikuko Kurahone in London, Alejandro Barbajosa in Singapore; editing by Keiron Henderson)

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