Gadhafi forces reportedly bomb the oil town of Brega
By Polya Lesova, Sarah Turner and Michael Kitchen, MarketWatch
LONDON (MarketWatch) — Crude-oil futures edged lower early Thursday, as traders watched closely the unrest in oil-rich Libya, where warplanes reportedly bombed a town held by rebels.
Crude oil for April delivery (CLJ11 101.82, -0.41, -0.40%) slipped 39 cents, or 0.4%, to $101.84 a barrel in electronic trading on Globex.
Investors were following closely developments in Libya, which has been rocked by turmoil triggered by an uprising against the regime of Moammar Gadhafi. Forces loyal to Gadhafi launched air strikes Thursday against the oil port town of Brega, which is controlled by rebels, according to media reports.
Earlier Thursday, the April crude contract hit an intraday low of $100.37 a barrel, as news surfaced of a possible plan to end the fighting in Libya.
Reuters reported that Arab League Secretary-General Amr Moussa said that Gadhafi had agreed to a plan proposed by Venezuelan President Hugo Chavez to seek a negotiated settlement with rebel forces.
Strategists at Commerzbank said in a note that reports of the peace plan for Libya had pressured oil prices, but that the dip was only temporary.
“It is doubtful that the protesters in Libya will agree to enter negotiations with Gadhafi, as the plan of Venezuelan President Chavez suggests,” they said, noting that the town of Brega has been targeted by air strikes this morning.
“Furthermore, there is still a risk of the unrest spreading to other oil- producing countries of the region,” the analysts said.
In New York on Wednesday, oil futures rallied 2.6%, 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 neighboring nations, 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.
There is growing speculation as to whether 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 11 and 20 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.
