(Oil prices, Libyan political crisis story updated for Tuesday trading)

NEW YORK ( TheStreet) -- Oil prices surged on Tuesday with the escalation of violence in Libya, and the first tangible impact to global oil supply from the wave of political turmoil across Northern Africa and the Middle East.

Brent crude was above the $106 mark on Tuesday and U.S. crude oil futures spike from an open at $90 to above $94, reaching as high as $98 during Tuesday trading. The surge in the price of oil on Tuesday saw brent crude touch above the $108 mark. In both cases, the Tuesday spike brought the highest oil prices since the fall of 2008, and the biggest equity markets dip since last August.

In Libya, there were reports of leader Moammar Kadafi using gunships, warplanes and mercenaries against mostly unarmed political protestors. The U.N. Security Council called an emergency meeting on Tuesday.

Libya is the third-largest oil producer in Africa, and 12th-largest oil exporter globally. Libya is the first country where recent political protests across Northern Africa, from Tunisia to Egypt, has impacted oil supply. Libya accounts for roughly 1.7% of world crude output.

Reuters reported on Tuesday morning that Libya had declared force majeure on its oil exports, which would amount to roughly 1.5 million barrels per day. Force majeure is a legal clause which removes contractual liability from a party if uncontrollable events occur.

The winds of political change across Northern Africa and the Middle East have stoked fears of global oil supply disruption, and ever-higher crude prices, yet it wasn't until the Libyan situation descended into chaos that the fears became tangible in terms of oil production and oil export impact.

Take Egypt, where historic events have taken place, but in a country that is a net importer of oil. There were fears of a Suez Canal closure in Egypt, and some specific energy companies with production in Egypt were caught up in the headlines, but at least so far, the Egyptian political crisis has not been an energy sector crisis maker.

By contrast, any way the data is crunched, Libya is a much bigger deal for the global markets, starting with its roughly 1.7 million barrels of oil per day, according to the International Energy Agency (IEA), and its position as the third largest oil market in Africa.

The larger fear remains that the political unrest in Northern Africa and the Middle East will lead to a disruption of oil supply in the critical producing nations, led by Saudi Arabia.

Europe, and European oil and gas companies, are heavily invested in the Libyan oil production and export market. Italy and Ireland, for example, had 22% and 23%, respectively, of their crude oil imports from Libya in 2010, according to IEA data. Overall, Europe receives 85% of Libyan oil exports; China received 3% of crude oil imports from Libya in 2010, according to the IEA.

For Libya, crude oil and gas are expected to account for 95% of export earnings and 80% of fiscal revenues through 2014, according to the International Monetary Fund. Libya is also the first OPEC country to suffer an oil production disruption as a result of the recent political crisis in Northern Africa and the Middle East.

Royal Dutch Shell ( RDS.A) announced that it had pulled workers from Libya this week. BP ( BP) evacuated works in Libya also. BP doesn't produce in Libya currently but has an exploration business. BP shares were down close to 2% on Tuesday.

Italian oil and gas company Eni ( E), the largest foreign oil and gas producer in Libya, was down 7% on Tuesday morning, leading losses amid another winning day for the energy sector.

Spanish oil and gas company Repsol ( REP) suspended all oil producing operations in Libya and cited port closures. Its shares were down close to 5% on Tuesday.

U.S. independent oil and gas company Marathon Oil ( MRO), which has been among the biggest energy sector gainers in 2011, was down close to 3% on Tuesday. Marathon Oil stated on Tuesday that its production in Libya had not been impacted by the political crisis.

Hess ( HES), which has a major exploration and production presence in Libya, was down more than 4% on Tuesday. Occidental Petroleum ( OXY), which has Libya among its strategic production markets for the next three years, was down close to 4% on Tuesday.

The International Energy Agency (IEA) said Monday that production of about 50,000 barrels of oil daily had already been shut down as a result of the events in Libya. The IEA said it would discuss this week the tapping of strategic supplies to make up for any shortage in Libyan production. OPEC would also be expected to cover any oil production shortfall caused by the political unrest in Libya.

Saudi Arabia's oil minister said on Tuesday that no special meeting of OPEC was being called for as a result of events in Libya.

-- Written by Eric Rosenbaum from New York.

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