Oil prices sink on reports of Libya peace plan

3rd March 2011, Comments 0 comments

World oil prices slid Thursday in nervous trading as investors digested Venezuela's proposal for an international peacekeeping mission to avoid a brutal civil war in Libya.

Brent North Sea crude for delivery in April dived $1.60 to $114.75 per barrel.

New York's light sweet crude for April, known as West Texas Intermediate (WTI), shed 44 cents to $101.79.

Prices had jumped on Wednesday by nearly $3 in New York as violent clashes erupted between Libyan leader Moamer Kadhafi's forces and the opposition, stoking concerns about the country's oil production.

"Oil in New York retreated for the first time in three days after reports emerged that Venezuela offered to mediate a resolution to the crisis in Libya," said Addison Armstrong, market research director at US-based brokerage Tradition Energy.

Libya and the Arab League are considering a mediation proposal by Venezuelan President Hugo Chavez to find a peaceful solution to the crisis in the North African nation, a Venezuelan minister said Thursday.

"We can confirm Libya's interest in accepting this proposal, as well as the Arab League's" interest, Information Minister Andres Izarra told AFP.

He added that Chavez, an ally of Moamer Kadhafi, recently spoke personally by telephone with Libya's embattled strongman to discuss the proposal.

However, Commerzbank analysts expressed doubts over the Venezuelan initiative.

"Reports on a peace plan for Libya have put pressure on oil prices. This dip in prices is only temporary in our view," they wrote in a research note to clients.

"It is doubtful that the protesters in Libya will agree to enter negotiations with (Kadhafi) as the plan of Venezuelan president Chavez suggests," they said.

"Furthermore, there is still a risk of the unrest spreading to other oil producing countries of the region."

Kadhafi's government has been rocked by two weeks of bloody clashes with protesters seeking to topple his 41-year-old regime.

Government jets pounded the rebel-held oil town of Brega on Thursday, sparking fears of a fresh onslaught by loyalist soldiers as a world court announced a crimes against humanity probe in Libya.

With thousands fleeing a violent crackdown on an anti-regime uprising that began on February 15, evacuations began Thursday of vast crowds stranded at the Tunisian-Libyan border, correspondents said.

A day after Kadhafi warned the West to stay out of the fray, the Dutch defence ministry announced Thursday three of its marines helping evacuate civilians from Sirte city were captured by Libyan soldiers.

Last week, Brent oil soared close to $120 as tensions flared in Libya. Brent trades at a significant premium to WTI because of high US stockpiles.

Elsewhere on Thursday, gold fell on profit-taking, one day after striking a record $1,440.32 per ounce as investors flocked to the safe-haven precious metal amid heightened concerns over Libya.

In recent weeks and months, oil prices have soared after popular uprisings toppled the leader of Tunisia in January, followed by long-time strongman Hosni Mubarak of Egypt in February.


© 2011 AFP

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