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WASHINGTON/RIYADH (Reuters) – The concern crapper weather a spike in lubricator prices, U.S. President Barack Obama said, as Arabian Arabia offered whatever pause to fears over Middle East lubricator supplies by indicating it crapper counterbalance goods cuts resulting from Libya's civil war.

After a surge in Brent lubricator prices to 2- assemblage highs near $120 a barrel, South Korea, the world's fifth-biggest vulgar importer, warned that it's inflation status was getting tougher.

Business executives fretted most ascension prices and investment banks said lubricator was reaching an deviation saucer that could threaten the world's feat from the orbicular business crisis.

"We actually conceive that we'll be healthy to ride discover the Libya status and it will stabilize," Obama, referring to render prices, told a group of joint honcho executives.

His Treasury Secretary said the concern had plentitude of lubricator reserves.

"We hit material power crossways the field economies in the strategic reserves," Timothy Geithner said.

"Hopefully, by reminding people of that and occupation attention to the fact that there's a clean amount of immoderateness power in parts of OPEC ... hopefully that will make it inferior probable the mart ... starts to build in higher prices over time."

The key venture for the concern frugalness is a sustained rise in the toll of oil. But after shooting up to near to $120 a containerful in intraday change on Thursday, Brent vulgar futures ended the period at inferior than $112, showing meet how full investors nerves are.

The sharp fall came after mart rumors that Libyan leader Muammar Gaddafi had been effort departed and on news that top shaper Arabian Arabia could counterbalance some supply disruptions.

On Friday, Brent vulgar was trading around $112. U.S. vulgar futures mitigated to $97.60 from a weekday broad of $103.41.

In Libya, forces hardcore to Gaddafi hit backwards in unmerciful armament battles with rebels retentive towns near the capital but there were no signs they had busted the contestant momentum.

The Organization of the Petroleum Exporting Countries (OPEC) has an estimated 4-6 meg barrels per period of constituent vulgar creation capacity, more than sufficiency on paper to counterbalance Libya's production of 1.6 meg barrels a day.

But markets are worried that the unrest strength distribute to large producers in the location that would hit a such large effect on the concern economy.

After open uprisings hit already toppled body in empire and Tunisia, governments in the location are taking notice.

Saudi Arabia this hebdomad unveiled a $37 billion package to essay to separate the land from the gesture of protests crossways the Semite world, patch Algeria raised a 19-year-old state of crisis as it proven to appease contestant groups.

"When you start adding the potential number of barrels at stake, you crapper see ground the mart is tense and would kinda be daylong lubricator than short," said Harry Tchilinguirian, honcho artefact strategies at BNP in London.

INFLECTION POINT?

Deutsche Bank said lubricator above $120 a containerful would be an deviation saucer for orbicular scheme growth. At that price, lubricator as a care of orbicular value starts to advise above 5.5 percent, historically a saucer where orbicular ontogeny has become low pressure.

Emerging Asia, which led the world's feat from the orbicular business crisis, is already disagreeable to care with escalating food prices. Higher lubricator prices will add to the dilemma for policymakers of how to include inflation and support scheme growth.

Yet added complexness is that patch the vulgar toll spikes this hebdomad emit a supply-side risk, lubricator prices were already ascension as scheme state around the concern picked up pace.

"The orbicular feat is ongoing, it is gaining more traction but the developments in the crude-oil sector as a result of the disturbance in the Middle East is putting to discourse the strength of that recovery," said Jose Mario Cuyegkeng, economist at ING in Manila.

Since most countries hit little curb over the concern toll of oil, raising welfare rates would not address the supply for their economies. But higher render prices could take through to another prices, such as transport, and inflation expectations.

"The surround influencing inflation is today such more difficult than what we had due at the modify of terminal year," said Yim Jong-yong, South Korea's evilness direction minister.

Indonesian bicentric slope help governor Hartadi A. Sarwono said he expects a past drop in food and artefact prices to push monthly inflation down in the country, but lubricator was a risk.

"We hit to be cagy on long-term inflation from ascension lubricator prices," he told reporters.

The compounding of broad lubricator prices undermining ontogeny patch fuelling inflation raises the individual of stagflation that blighted economies in the 1970s.

Westpac rates contriver writer Jones said there was a venture of stagflation but there were scheme differences today -- including inferior certainty on lubricator and meliorate bicentric slope credibility -- to declare some outbreak would be mild and brief lived.

Still, it would ease result in a garner up in the measure of monetary contract tightening, he said.

"The individual that lubricator prices rest elevated, the more probable that the dweller Central Bank and Bank of England could raise in the second quarter. Emerging mart bicentric banks are also apt to tighten more aggressively.

(Additional news by Lee Shin-hyung in Seoul)

(Writing by John Mair in MANILA; Editing by Neil Fullick)

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