Residents riding in the back of a vehicle celebrate and...

Residents riding in the back of a vehicle celebrate and display the victory sign in Benghazi, Libya. (Feb. 21, 2011) Credit: AP

Oil prices jumped more than $3 a barrel on Monday apparently on investor concerns over civil disorder in Libya that could disrupt its crude supplies.

But officials said Monday oil producing nations have emergency reserves to draw on to stabilize markets in case the violence escalates to seriously affect energy production, officials said Monday.

Nevertheless, international executives and analysts meeting in London nervously watched developments in the oil-rich region, worried about the sharp shock political unrest is giving to crude oil prices.

Oil prices rocketed on Monday after Seif al-Islam Gadhafi, son of Libyan leader Moammar Gadhafi, warned protesters on Sunday that they risked igniting a civil war in which Libya's oil wealth "will be burned." By early afternoon in Europe, benchmark crude for March delivery was up $3.10 to $89.30 in electronic trading. U.S. markets, including the NYmex floor trading, were close Monday for Presidents Day.

David Fyfe, head of the oil industry and markets division at the International Energy Agency, stressed that the IEA has reserves of 1.6 billion barrels of oil - equivalent to some 4 million barrels per day for the next 12 months - that could be brought onto the market if necessary.

The IEA has used government stocks to steady the oil market only twice before, during the Gulf War in 1991 and after Hurricane Katrina hit the Gulf of Mexico in 2005.

"It's very much a last resort, but it's worth pointing out that it exists and has been used before when supplies have been disrupted," he said.

"It's a sort of insurance policy for the market. Our view is that it isn't something that should be used for price management," he said.

Some analysts are worried higher oil prices will undermine a fragile economic recovery in developed countries. For every $1 increase in the price of a gallon of gasoline, U.S. consumer spending falls by about $120 billion, said Morgan Stanley economist Gerard Minack.

"Energy is more important for developed-world consumers than food," Minack said. "This is why further sharp rises in oil prices, if they occur, would be likely to be seen as a threat to growth."

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