Oil prices jumped by over $4 a barrel on Monday amid investor concerns that violent protests spreading in Libya could disrupt crude supplies from the OPEC nation and affect other oil-rich countries in the region.
By late afternoon in Europe, benchmark crude for March delivery was up $4.03 to $90.23 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 16 cents to settle at $86.20 on Friday.
U.S. markets, including Nymex floor trading, were closed Monday for the Presidents Day holiday and the thin trading volumes had the potential to amplify price fluctuations.
In London, Brent crude for April delivery gained $2.37 to $104.89 a barrel on the ICE Futures exchange.
The spread between the Nymex and Brent contracts has narrowed slightly but still remains far above usual levels of a few dollars per barrel. Brent is considered to be more sensitive to possible disruptions of Middle East oil supplies, while large U.S. stockpiles of crude are one of the reasons for the lower Nymex quotes.
On Sunday, Seif al-Islam Gadhafi, son of Libyan leader Moammar Gadhafi, warned protesters that they risked igniting a civil war in which Libya's oil wealth "will be burned."
While Libya is among the one of the world's biggest oil producers and has the largest proven oil reserves in the whole of Africa. It produces around 1.6 million barrels of crude a day and exports 1.1 million barrels.
Oil companies like U.K.-based BP and Germany's Wintershall said they were temporarily suspending operations in Libya, while Italy's Eni said production continued normally. Some of the firms also began evacuating their foreign employees there.
"Compared to Tunisia (a minor crude exporter) or Egypt (not an exporter but a transit country), instability in Libya is a major concern to the oil industry," said analysts at JBC Energy in Vienna.
Earlier Sunday, anti-government demonstrations spread to the Libyan capital of Tripoli and protesters seized military bases and weapons. In the eastern city of Benghazi, about 60 people were killed, while more than 200 have died since the unrest began seven days ago.
Oil traders are also closely watching recent protests in Iran, which is the second-largest crude exporter in the Organization of Petroleum Exporting Countries behind Saudi Arabia.
"The concerns in the market go beyond Libya," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "It's unlikely we're going to see any meaningful disruption of oil from the Middle East or North Africa, but the spread of this unrest has raised anxieties."
Experts also mentioned the possible spread of the political upheaval to Saudi Arabia as a possible threat to oil supplies and a bullish factor for oil prices. The kingdom which sits atop the world's largest proven reserves of conventional crude oil.
"The 'elephant in the room' that has the potential to really ignite the markets is Saudi Arabia," said senior commodity analyst Edward Meir at MF Global in New York. "We have to suspect that the government is watching the situation in Bahrain with some trepidation, as the Saudi leadership mirrors the Bahraini one in that most of its governing class are Sunnis, while the governed are Shiites."
The Shiite minority is primarily located in Saudi Arabia's eastern province, where the bulk of its oil is located.
Bahrain, where protesters are calling for the ouster of the ruling monarchy, on Monday suspended its Grand Prix, the first race of the Formula One season and the country's biggest international event.
In other Nymex trading in March contracts, heating oil rose 6.6 cents to $2.7789 a gallon and gasoline gained 5.87 cents to $2.61 a gallon. Natural gas futures advanced 5.6 cent to $3.932 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.
Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.