Oil prices rose toward $98 a barrel Tuesday as the power struggle in Libya cut crude production and traders mulled whether political upheaval will spread to other oil-rich countries.
By early afternoon in Europe, benchmark crude for April delivery was up 74 cents at $97.71 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 91 cents to settle at $96.97 on Monday.
In London, Brent crude for April delivery was up $1.02 to $112.82 a barrel on the ICE Futures exchange.
Libya's top oil official, Shukri Ghanem, said Monday that the country's crude production had been cut by around 50 percent, or about 800,000 barrels a day. International pressure increased on Libyan leader Moammar Gadhafi to step down as his supporters and opponents fought in towns outside the capital, Tripoli.
In an effort to compensate for the loss of Libyan crude, Saudi Arabia has boosted its oil output _ a move which soon could be replicated by other exporters in the region, analysts said.
"At current prices it makes sense for both Kuwait and the UAE to also increase supplies rather than stay idle and watch Saudi Arabia increase its market share," said Olivier Jakob of Petromatrix in Switzerland.
So far Libya has been the biggest oil producer to see exports disrupted by political uprisings this year that have toppled governments in Tunisia and Egypt and sparked violent protests in Yemen, Iran, Oman, Bahrain, Algeria and Morocco.
Oil traders are most concerned the unrest could spread to Saudi Arabia, the world's largest crude exporter. Some analysts expect oil prices will drop once Gadhafi resigns or Libyan oil exports stabilize.
"Sharply higher energy prices are a clear threat to the world economy and to emerging markets," Citigroup said in a report. "However, most likely, this phase will pass, oil prices will be contained and markets will rally."
The market is also awaiting information about U.S. stockpiles of oil and refined products.
Data for the week ending Feb. 25 is expected to show builds of 1.6 million barrels in crude oil stocks and of 900,000 barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration _ the market benchmark _ will be out on Wednesday.
In other Nymex trading in April contracts, heating oil rose 2.35 cents to $2.9624 a gallon and gasoline gained 1.8 cents to $2.9107 a gallon. Natural gas futures were down 0.3 cent at $4.035 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.