Oil surged more than 7.5 percent to its highest level since August 2008 today on concern that unrest in Libya could spread to other major oil producing nations in the Middle East, including Saudi Arabia, according to Reuters.

Brent crude futures for April jumped $8.54 per barrel to a peak of $119.79, before easing back to around $114 early this morning.

Disruption stemming from the revolt in Libya has cut at least 400,000 barrels per day from the country’s usual output of 1.6 million barrels per day, according to Reuters calculations. Paolo Scaroni, CEO of Italian oil company Eni, estimated a more drastic fallout.

“There are 1.2 million barrels (per day) less on the market,” Scaroni told reporters in Rome.

Reuters market analyst Wang Tao said Brent crude could be on course to rise to $158 per barrel in 2011, well above the 2008 high of $147.50, and he expects U.S. crude to hit $159 per barrel.

U.S. crude for April delivery rose as to as much as $103.41, the highest since September 2009.

Goldman Sachs Group Inc. on Thursday issued a note saying the world would not be able to cope with another Libya-style oil production outage.

“This makes the risks now associated with further contagion much higher than they were several days ago as further disruptions could create severe shortages in global markets that would require substantial demand rationing,” Goldman Sachs analyst Jeffrey Currie said.