Brent oil prices pushed back above $116 a barrel and U.S. oil hit its highest since September 2008 on Friday, as fighting in Libya intensified and threatened the country's oil sector.

Investors feared extended supply disruptions as rebels fought Libyan security forces in Ras Lanuf, a major oil terminal, and as fighting broke out in Bahrain and Yemen and top-exporter Saudi Arabia, where Saudi Shi'ites staged protests on Thursday.

Brent crude futures for April delivery rose $1.18 to settle at $115.97 a barrel, having reached a high of $116.49.

U.S. crude for April delivery rose $2.51 to settle at $104.42 a barrel, highest close since September 2008.

As of 3:42 p.m. EST (2030 GMT), Friday's peak of $104.94, reached in post-settlement trading was the highest intraday price since front-month crude hit $106.91 on September 29, 2008.

Tension in the Middle East is like a runaway train, said Michael Hewson, an analyst at CMC Markets in London. Once it starts, it's very difficult to stop. And if there is a danger that it impacts the supply chain, people will understandably get nervous.

Brent's premium to its U.S. counterpart fell $1.33 to $11.55 a barrel, based on settlement prices, continuing to retreat from last week's record $16.91.

Positive U.S. employment data helped crude futures in the United States extend gains and reduce its discount to Brent.

U.S. nonfarm payrolls rose more than forecast in February, hitting a nine-month high, and the jobless rate slipped to a nearly two-year low of 8.9 percent.

U.S. crude gains appear more inspired by this week's favorable economic guidance.... On the Brent side, curtailed refinery activity and the addition of more Saudi cargoes aimed toward Europe have appeared to take some steam out of the Brent rally, Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note.

LIBYA CLASHES INTENSIFY

Libyan leader Muammar Gaddafi's forces battled rebels on several fronts as the country's crisis worsened and unrest erupted in the capital.

Rebels drove Gaddafi's forces from Ras Lanuf and have taken the eastern oil town, two rebel soldiers told Reuters by telephone.

Al Jazeera television reported that an oil facility at Zueitina, south of Benghazi was damaged and on fire.

Estimates of how much Libyan oil output is shut have varied, with 1 million barrels per day (bpd) the latest assessment from the International Energy Agency, moving its estimate to the higher end of the 850,000-1 million-bpd bracket it gave on Wednesday.

MIDDLE EAST UNREST

Demonstrations swelled into hundreds of thousands in oil producer Yemen, neighbor to Saudi Arabia, where President Ali Abdullah Saleh rejected an opposition plan for him to transfer power this year.

Fighting between Sunni and majority Shi'ite Muslims in central Bahrain injured several people overnight in the first sectarian violence since protests erupted in the Sunni-ruled kingdom two weeks ago.

Hundreds of Omanis demanding jobs and political reforms demonstrated across the Gulf Arab sultanate, a small oil producer.

(Additional reporting by Gene Ramos in New York, Claire Milhench in London and Florence Tan in Singapore; Editing by David Gregorio)

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