By David Winning
Of DOW JONES NEWSWIRES
SYDNEY (Dow Jones)--Crude-oil futures jump above $103/bbl Monday following UN-sanctioned aerial and naval strikes on military forces loyal to Libyan leader Col. Moammar Gadhafi, with analysts talking up a major rally if the loss of Libyan oil supply is prolonged.
The oil market ignored Libya's announcement of a new cease-fire in the campaign by Gadhafi's regime against an uprising, after an earlier promise to lay down arms proved hollow when Gadhafi's troops continued an assault on the rebel stronghold of Benghazi.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded at $102.94 a barrel at 2239 GMT, up $1.87 in the Globex electronic session. The contract earlier hit an intraday high of $103.19/bbl.
Libya, a member of the Organization of Petroleum Exporting Countries, pumped 1.65 million barrels a day of crude prior to a popular uprising against the Gadhafi regime.
In a sign that traders expect UN-sanctioned military intervention in Libya to limit oil supply for a sustained period, Nymex crude for May delivery was trading at a premium to the April contract. At 2239 GMT, Nymex crude for May delivery was up $1.99 at $103.84/bbl.
Josephine Heffernan, senior economist at St. George, noted comments in the media by Libyan oil minister Shukri Ghanem that crude production in the North African country "could reach a halt" due to conflict.
Ghanem, who is also chairman of Libya's National Oil Corporation, said the country's oil output currently stands at 400,000 barrels per day, less than a third of normal.
The prolonged loss of Libyan crude in the wake of military intervention by U.S., France and their allies could push oil prices all the way up to the highs above $140 seen in 2008, says Julian Jessop, chief international economist at Capital Economics.
Although Libya only accounts for 2% of the world's oil supply, the strength of global demand as economies such as the U.S. recover and China's oil consumption continues to grow sharply means the oil market remains tight.
"The upward pressure on the price of oil to date has been capped by the expectation that the disruption to Libyan supply will only short-lived, allowing it to be offset fairly easily by drawing on stockpiles and increases in output from elsewhere, notably Saudi Arabia. This might change if there is more serious damage, accidental or otherwise," Jessop says.
However, the risk of a nuclear disaster in Japan appeared to diminish over the weekend, weakening another plank that has been supporting oil futures for more than a week.
Japan has restored power to parts of the earthquake-damaged Fukushima Daiichi plant and are bringing down radiation levels with a marathon water-spraying operation.
Japan's Defense Minister, Toshimi Kitazawa, said the temperature in all of the pools that store spent nuclear fuel at the six reactors has fallen below 100 degrees centigrade, or 212 degrees Fahrenheit, a key advance after fears that the spent fuel could explode and spew large amounts of radiation into the air.
-By David Winning, Dow Jones Newswires; +61-2-82724688 +61-2-82724688 david.winning@dowjones.com
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