Libya unrest keeps oil market on edge; stocks up

Crude oil prices held near two-and-half year peaks on Thursday as worries about supply disruption persisted given ongoing unrest in Libya, but upbeat US economic news and a firmer Wall Street helped Asian stocks post modest gains.

Both US crude and Brent crude prices edged up as Libyan rebels repulsed a land and air offensive by Muammar Gaddafi's forces and the defiant leader warned foreign powers of "another Vietnam" if they intervened.

Gold, often sought in times of heightened geopolitical tensions and as an inflation hedge, traded at USD 1,431.85 an ounce, within striking distance of the record high of USD 1,440.10.

Tokyo's Nikkei average rose 0.5%, while stocks elsewhere in Asia gained 0.3%. South Korea's KOSPI advanced 1.4%, while Australia's S&P/ASX 200 index was little changed.

"It's too early to be optimistic because concerns about rising oil prices will likely persist," said Masumi Yamamoto, a market analyst at Daiwa Securities Capital Markets.

"But investors might have oversold yesterday, so they may buy back stocks with good fundamentals."

US crude last traded at USD 102.62 a barrel, not far from the recent peak at USD 103.41, while Brent crude was at USD 116.58, closing in on the USD 119.79 high.

Wall Street eked out small gains on Wednesday with the S&P 500 index edging up 0.2% came after the Federal Reserve's Beige Book suggested economic activity picked up in 2011 and a private survey pointed to strong private-sector hiring.

The private-sector hiring report bodes well for the influential non-farm payrolls data due on Friday.

In the currency market, the euro was a touch softer after rallying to near four-month highs against the dollar. The single currency, however, is expected to stay supported ahead of the European Central Bank policy meeting.

Markets are wary the ECB will sharpen its anti-inflation rhetoric, reinforcing views the ECB will raise interest rates before the US Federal Reserve.

The euro last traded at USD 1.3852 , having climbed as high as USD 1.3890. The dollar index, which tracks its performance against a basket of major currencies, was little changed on the day at 76.708, just off the overnight low of 76.529, its lowest since early November 2010.