MW: Oil falls sharply on reported Libya peace deal
By Sarah Turner and Michael Kitchen, MarketWatch
LOS ANGELES (MarketWatch) — Oil futures beat a sharp retreat during Asian trading hours Thursday afternoon, as news surfaced of a possible plan to end fighting in Libya.
After trading above $102.50 earlier in the Asian day, benchmark Nymex crude for April delivery (CLJ11 101.22, -1.01, -0.99%) tumbled to $100.99 in electronic trade.
The turnaround came as Reuters reported Arab League Secretary-General Amr Moussa had confirmed reports Libyan leader Moammar Gadhafi had agreed to a plan proposed by Venezuelan Pres. Hugo Chavez to seek a negotiated settlement with rebel forces.
In regular trading in New York on Wednesday, oil futures jumped 2.6% by the close of trading, the second straight day of gains and the highest settlement for the contract since Sept. 25, 2008.
Oil prices had seen big gains recently as unrest gripped the Middle East and North Africa, spreading from Tunisia to the surrounding areas, including Libya.
“The near-unraveling of the Gadhafi regime has riled up the markets in a way that Egypt and Tunisia did not. With Libyan oil exports significantly cut back on account of the unrest, oil prices have pushed higher,” said analysts at MF Global, prior to the reported acceptance of the peace proposal.
However, the new developments in Libya may not end analysts’ concerns that a pro-democracy movement could spread to large-scale oil producer Saudi Arabia.
“In addition to the turmoil that we know about, there is turmoil that has yet to unfold. In this regard, demonstrations are reportedly scheduled for March 11th and 20th in Saudi Arabia, and although we doubt anything much will come out of this event, oil markets will be understandably nervous until then,” said the MF Global analysts.
