Oil touches $100 a barrel for first time in two years

Oil surged to $100 a barrel in New York for the first time in two years Wednesday as Libya's violent uprising threatened to disrupt exports from Africa's third-biggest supplier and spread to other Middle East oil producers.

Futures climbed as much as 4.8 percent after heavy gunfire broke out in Tripoli again Wednesday, army units defected, and a former aide to Libyan leader Moammar Gadhafi warned that the spreading revolt may topple the regime within days. Oil pared gains on signals that Saudi Arabia and some other producers are willing to put more oil on the market if buyers demand it.

"We're crossing $100 because with the cut in Libyan output, the unrest in the Middle East is actually having an impact on oil supply," said Phil Flynn, vice president of research at PFGBest in Chicago.

Crude for April delivery increased $2.68, or 2.8 percent, to settle at $98.10 a barrel on the New York Mercantile Exchange. Earlier, it touched $100, the highest level since Oct. 2, 2008. Futures are up 24 percent from a year ago.

Libya, which pumps 1.6 million barrels of oil a day, is the ninth-largest producer among the 12 members of the Organization of Petroleum Exporting Countries, sending most of its crude and fuels across the Mediterranean to Europe. The country has the largest reserves in Africa.

Companies including Total SA, OMV AG, Eni SpA, and RWE AG said they had scaled back their Libyan operations.

"Prices are moving above $100 because of worries Libyan supplies will be cut off," said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield, Mass.

Libya is the latest nation to be rocked by protests ignited by the ouster of Tunisia's president last month and fanned by the Feb. 11 fall of Egyptian President Hosni Mubarak.

Gadhafi vowed Tuesday to fight the growing rebellion until his "last drop of blood."

Saudi Arabia's King Abdullah boosted spending Wednesday on housing by $10.7 billion and allocated more money for education and social welfare after protests reached neighboring Bahrain. The kingdom is the world's largest crude exporter.

Brent oil for April settlement rose $5.47, or 5.2 percent, to $111.25 a barrel on the ICE Futures Europe exchange, the highest close since Aug. 29, 2008.

The global economy is in a much stronger position to handle rising oil prices than it was in 2008, when crude shot up to a record $147.27 a barrel in New York, U.S. Treasury Secretary Timothy F. Geithner said Wednesday during a Bloomberg Breakfast in Washington. "Central banks have a lot of experience in managing these things."

Oil prices may surge to $220 if production is halted in Libya and Algeria because of spreading unrest in the region, Nomura Holdings Inc. said Wednesday in a note. Algeria is also a member of OPEC.

Oil volume in electronic trading on the Nymex was 1.17 million contracts as of 2:55 p.m. in New York. Volume totaled 1.44 million contracts Tuesday, 91 percent above the average of the last three months and the highest level since a record 1.47 million Jan. 28. Open interest was 1.51 million contracts.