Oil dropped the most in a week after reports the Arab League is studying a plan to end the violence in Libya, which has cut crude supplies from Africa’s third biggest producer. Crude fell as much as 1.8 percent, the biggest intraday decline since Feb. 24, after Al Arabiya TV cited Arab league Secretary General Amr Moussa as saying the group is studying a plan proposed by Venezuelan President Hugo Chavez. Violence has cut Libyan oil supplies by as much as 1 million barrels a day, according to the International Energy Agency. “I’m sure there will be a lot of talk like this,” said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “But a lot of people are saying that it’s an all-or-nothing situation. I won’t be convinced until it’s over.” Crude for April delivery slid as much as $1.86 to $100.37 a barrel in electronic trading on the New York Mercantile Exchange and was at $101.28 at 2:28 p.m. in Singapore. The contract earlier today rose as much as 71 cents to $102.94. Brent crude for April settlement fell as much $3.26, or 2.8 percent, to $113.09 a barrel on the London-based ICE Futures Europe exchange. That was the biggest intraday decline since Nov. 12. Oil also declined in on signs the market is “overbought,” prompting investors to sell contracts. The front-month contract’s 14-day relative strength index yesterday rose to 74.67, the highest since June 2009, and is above 71 today, according to data compiled by Bloomberg. A reading of 70 typically indicates a price is set to retreat, while 30 suggests it may recover. To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net

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