US crude oil hits 2.5-year high, Brent nears $120

Brent crude rose towards USD 120 a barrel and US crude hit a 2-1/2-year high above USD 108 on Monday as unrest in the Middle East and North Africa kept the focus on oil supplies as economic growth bolstered demand.

Comments by Iran's oil minister that there was no need for the Organization of the Petroleum Exporting Countries to hold an extraordinary meeting also supported prices.

Iran is OPEC's leading oil price hawk and holder of the cartel's rotating presidency in 2011.

ICE Brent rose USD 1.05 to a high of USD 119.75 a barrel, its highest since February 24, before slipping back to trade around USD 119.50 by 0845 GMT.

US crude was up 70 cents at USD 108.64 a barrel by 0845 GMT, after touching USD 108.78 earlier in the session, its highest since September 2008.

Edward Meir, senior commodity analyst at brokers MF Global, said investors seemed to be in no mood to sell the markets despite the "less than compelling fundamental backdrop".

Analysts say the loss of oil from Libya has been more or less offset by Saudi Arabia, while the Japanese crisis should also reduce oil import demand, suggesting "there likely is a statistical surplus in the system right now", Meir said.

"However, participants are not bothering with data for the moment, as the focus remains on headlines out of the Middle East. Moreover, the fact that global growth has yet to show any significant sign of decelerating is also keeping the "buy commodities" theme very much intact," he added.

Libyan talks

The government of Libya -- the world's 17th-largest oil producer and Africa's third-largest -- has sent an envoy to Greece to discuss an end to fighting, but gave no signs of any major climb down in a war that has ground to a stalemate between rebels and forces loyal to Muammar Gaddafi.

In Yemen, police using live rounds and tear gas wounded hundreds of protesters marching on a presidential palace in the Red Sea city of Hudaida on Monday in a sign of fraying nerves as the political crisis deepened.

Gulf Arab states have expressed concern over what they call Iranian interference in their affairs after Iran objected to the despatch of Saudi troops to Bahrain and a spying row raised tensions.

Bahrain has seen the worst unrest since the 1990s after mostly Shi'ite protesters took to the streets in February, inspired by uprisings that toppled leaders in Egypt and Tunisia, to demand a bigger say in the Sunni-ruled country.

Upcoming elections in OPEC member Nigeria are also coming into focus.

Oil got a boost at the end of last week from strong US payrolls data. US employment grew firmly for a second straight month in March and the jobless rate hit a two-year low of 8.8%, fuelling optimism about oil demand.

The positive data helped push Asian shares to their highest in nearly three years on Monday. China's stock, money, foreign exchange and commodities futures markets were closed on Monday and Tuesday for a public holiday.