Oil hovers at $98 as traders eye Japan, MidEast

Traders work in the oil options pit at the New York Mercantile Exchange in New York, Monday, March 14, 2011. (AP Photo/Seth Wenig)
Traders work in the oil options pit at the New York Mercantile Exchange in New York, Monday, March 14, 2011. (AP Photo/Seth Wenig) (Seth Wenig - AP)
The Associated Press
Thursday, March 17, 2011; 1:49 AM

SINGAPORE -- Oil prices hovered over $98 a barrel Thursday in Asia as traders watched closely Japan's battle to avoid a full meltdown at a damaged nuclear plant and clashes in Bahrain and Libya.

Benchmark crude for April delivery was up 38 cents at $98.36 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract gained 80 cents to settle at $97.98 on Thursday.

In London, Brent crude was up 17 cents at $110.77 a barrel on the ICE futures exchange.

Japanese military helicopters dumped loads of seawater onto the Fukushima Dai-ichi nuclear complex Thursday in a bid to cool overheated uranium fuel rods that may be close to leaking more radiation. The plant was initially damaged last week by a massive earthquake and tsunami that is estimated to have killed more than 10,000 people and left hundreds of thousands homeless.

Traders are mulling what impact the disaster will have on crude demand. Goldman Sachs estimates the cost of the disaster's damage could reach $200 billion.

"The market continues to focus on short-term demand losses through reduced economic activity," Barclays Capital said in a report. "However, the current loss of about 1 million barrels a day is likely to return relatively swiftly as some thermal plants resume operations and economic activity restarts."

In Bahrain, clashes between security forces - some brought in from Saudi Arabia and other Gulf states - and anti-government protesters left five people dead as the Al Khalifa monarchy struggles to hold onto power. Saudi Arabia is the world's largest oil exporter, and some analysts are worried the Bahrain unrest could spark an escalation of a conflict between Sunni Saudis and Shiite Iran.

The intervention of Saudi troops in Bahrain "could serve to deepen the ongoing political crisis in the country and intensify the regional power struggle between Saudi Arabia and the Iranians," Barclays said. "The geopolitical backdrop of the oil market remains highly charged, likely to support prices at elevated levels and heightened volatility."

Meanwhile, fighting during the last month between government and rebel forces in Libya has cut most of the OPEC nation's crude production. On Wednesday, forces loyal to Moammar Gadhafi continued to push back rebels toward their few remaining strongholds.

In other Nymex trading for April contracts, heating oil was up 0.3 cents at $3.00 a gallon and gasoline dropped 0.4 cents to $2.84 a gallon. Natural gas rose 2.1 cents at $3.96 per 1,000 cubic feet.

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