BANGKOK — The oil price hovered near $105 a barrel Tuesday in Asia, giving back some of the previous day's gains but still near its highest level since late 2008 as battles raged between Libyan rebels and forces loyal to Moammar Gadhafi.
Benchmark crude for April delivery was down 68 cents at $104.75 a barrel at late morning Bangkok time in electronic trading on the New York Mercantile Exchange. The contract gained $1.02 to settle at $105.44 a barrel on Monday after nearly hitting $107, the highest level since Sept. 26, 2008.
In London, Brent crude was down 59 cents at $114.45 a barrel on the ICE futures exchange.
Libya, which sits on the largest oil reserves in Africa, has been engulfed in a four-week rebellion as militants try to oust Gadhafi after 41 years in power. Officials in the country say oil fields continue to operate, but daily exports of 1.5 million barrels could be cut off for some time.
On Monday, Libyan warplanes launched more airstrikes on rebel positions around the Ras Lanouf oil port as forces loyal to Gadhafi tried to keep rebels from advancing on his stronghold in the capital, Tripoli.
OPEC has ramped up production to make up for the loss of Libyan crude.
Also, the Obama administration is evaluating whether to tap U.S. strategic oil reserves to slow the rising price of oil. A White House spokesman said officials will base that decision on a variety of factors, including the flow of oil to the U.S.
Releasing additional supplies and ramping up production could temporarily cool off overheated energy markets, but experts warned that it also would put a tighter squeeze on the world's oil as the global economy recovers and consumption rises.
"They'll remove the cushion of extra supplies," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "Until this situation gets resolved, prices are going to continue to grind higher."
It also doesn't make sense to tap into the U.S. reserves right now, analyst and trader Stephen Schork said. The supply problem exists mostly in Europe, where many refineries rely on Libyan crude. In contrast, U.S. refineries have access to a relatively large supply.
The Energy Information Administration estimates OPEC can crank up production by another 4.7 million barrels per day. An extended shut down of Libya's exports would slice that capacity by about 32 percent to around 3.2 million barrels per day. Most of the world's spare capacity lies in OPEC nations, primarily Saudi Arabia.
"The question then is what else can happen," said Erik Kreil, who covers international energy markets for EIA. "If it gets worse in North Africa or the Middle East, production could fall further and you'll have less spare capacity."
Global spare capacity fell below 2 million barrels per day in 2008 before oil prices spiked to an all-time record of $147 per barrel.
In other Nymex trading for April contracts, heating oil was down 2.1 cents at $3.04 a gallon and gasoline fell 1.4 cents to $2.99 a gallon. Natural gas was down 1.1 cents at $3.916 per 1,000 cubic feet.
Associated Press Writer Paul Schemm contributed to this story from Ras Lanouf, Libya.