Oil, Japan and Libya

So how is war in the Middle East and disaster in the world's third largest economy affecting the oil market?

Clifford Krauss in the New York Times has penned a smart analysis today on that important question.

While the human drama in Japan and in Libya remains in the forefront, the price of oil is a signficant factor for the global economy.

That's because the global economy has been showing signs of life so far in 2011.

But a sustained spike in oil prices — which bleed through in the form of higher costs for gas, food and other products — could derail all that.

So one of the big questions for the past week has been whether slower demand in disaster-ravaged Japan — a major consumer and importer of oil — would offset the disruptions caused by the ongoing war in Libya.

According to Krauss the answer is yes.

For now.

"All told, Japanese demand for oil has been reduced by an estimated 1 million barrels a day," he writes. "That is nearly one-quarter of what Japan imports, and roughly the same amount of oil that has been withdrawn from world markets by the unrest in Libya."

Oil prices have jumped about 20 percent since the unrest in the Middle East began. But they've been relatively stable since the U.S. and its allies began bombing Libya.

But that stability in the markets may not last.

Serious questions remain about Japan's nuclear power capabilities amidst the ongoing disaster at Fukushima, and what impact it will have on Japan's overall energy needs.

One of the other key factors to watch is booming China, where oil demand has reached 9.5 million barrels a day, or about 10 percent greater than it was just one year ago.

Oil prices are slightly higher today in early trading.

Light crude for May is now trading above $105 per barrel.