Oil prices recovered from a steep sell-off and rose above $98 a barrel Wednesday, as markets weighed the risk of escalating violent clashes in the Middle East against the impact of Japan's natural disasters on demand.
Demonstrators in Bahrain said at least two people were killed Wednesday when troops and police battled with anti-government protesters. On Tuesday, about 1,000 soldier from Saudi Arabia entered Bahrain at the request of the government to help quell the uprising.
"While the uncertainty level in economic and geopolitical realms is high, the political outlook in the Middle East and north Africa region is not improving, keeping the geopolitical premium elevated," said a report from JBC Energy in Vienna.
By midday in Europe, benchmark crude for April delivery was up $1.40 at $98.58 a barrel in electronic trading on the New York Mercantile Exchange. In London, Brent crude was up $1.53 at $110.05 a barrel on the ICE futures exchange.
On Tuesday, crude dropped $4.01 to settle at $97.18 as Japan struggled to control a damaged nuclear plant and cope with a devastating earthquake and tsunami.
Global investors have fled riskier assets after a massive quake and tidal wave demolished Japan's northeast coast and killed an estimated 10,000 people. On Wednesday, Japan suspended operations to keep a stricken nuclear plant from melting down after surging radiation made it too dangerous to stay.
"Japan accounts for approximately 5 percent of global oil demand and is the world's third largest oil consumer," Commerzbank said. "The still uncertain situation in the Middle East and Japan's higher demand for oil for power generation speak against a further fall in prices."
Meanwhile, monthlong fighting between government and rebel forces in Libya has cut most of the OPEC nation's crude production.
"The situation in Libya appears to be easing in terms of security for oil production, with virtually all Libya's major oil production sites meanwhile back in the control of government troops, but a return to normal oil production soon is unlikely, given the damage to infrastructure," said analysts at Commerzbank in Frankfurt.
Helping crude prices somewhat were inventory figures suggesting a pick-up in demand in the U.S.
The American Petroleum Institute said late Tuesday that crude inventories rose 91,000 barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast an increase of 2.1 million barrels. Inventories of gasoline fell 458,000 barrels and distillates rose 531,000 barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data — the market benchmark — later Wednesday.
In other Nymex trading for April contracts, heating oil was up 3.26 cents at $2.9864 a gallon and gasoline gained 2.76 cents to $2.8305 a gallon. Natural gas rose 4.9 cents to $3.99 per 1,000 cubic feet.
___
Alex Kennedy in Singapore contributed to this report.
Fox News' "Antisemitism Exposed" newsletter brings you stories on the rising anti-Jewish prejudice across the U.S. and the world.