FRX: COMMODITIES-Oil, gold ease on talk of Mideast peace plan
MARKETS-COMMODITIES/
* Investors cash in on oil, gold after hefty gains * Focus still on violence between Libyan forces, rebels
* Arab League mulls Chavez peace plan; markets unconvinced
By Jan Harvey
LONDON, March 3 (Reuters) - Oil prices were lower on Thursday as speculation a peace deal may be brokered for Libya prompted some investors to cash in gains, but the market remained elevated on concerns over ongoing unrest in the region.
A report the Arab League was considering a peace plan for Libya proposed by Venezuelan President Hugo Chavez led some players who had bet on rising prices to close their positions overnight.
Though the rally has paused, oil remains firmly underpinned by the threat that violence in Libya, one of a string of countries in North Africa and the Middle East to see recent unrest, may worsen and spread across the oil-producing region.
Brent crude oil was at $115.55 a barrel at 1120 GMT, down 0.6 percent but well off earlier lows of $113.09. U.S. crude oil was down 44 cents to $101.79 a barrel.
Gold prices retreated from record highs as oil declined, while industrial metals edged higher.
Oil prices had hit 2-1/2 year highs last week after protests that unseated leaders in Egypt and Tunisia spread, hurting stock markets and industrial metals while boosting perceived safe havens such as gold.
"There is no doubt that everything right now is dancing to the tune of oil prices," said Saxo Bank senior manager Ole Hansen. "An escalation is still at the back of people's minds, but it seems that that has now gone on the back burner."
He added, "The market is reluctant to drive this (rally) much further until we have additional news, because the shortfall we so far have in oil supplies can easily be made up."
Violence is still simmering in the region. Muammar Gaddafi's army is facing an increasingly organised and confident rebel force, which is appealing for international support and looking to take its military successes west towards Tripoli.
As for the proposed peace plan, Arab League Secretary-General Amr Moussa told Reuters, "We have been informed of President Chavez's plan, but it is still under consideration." Analysts were sceptical the plan would lead to peace.
"It is doubtful that the protesters in Libya will agree to enter negotiations with Gaddafi as the plan of Venezuelan President Chavez suggests," Commerzbank said in a note.
"Yesterday, government troops attacked a major oil terminal in Marsa El Brega. The oil city controlled by the rebels has again been subjected to attacks from the air this morning."
RETREAT FROM HIGHS
Spot gold slipped as low as $1,422.35 overnight as talk of a peace deal hurt prices but later recovered to $1,428.75 an ounce versus $1,434.49 late on Wednesday.
Silver was at $34.55 an ounce against $34.67, off the previous session's 31-year high of $34.96.
Gold prices hit record highs on Wednesday and its sister metal silver its strongest since early 1980.
Industrial metals prices firmed on Thursday, lifted by a retreat in oil prices.
Three-month copper on the London Metal Exchange ticked up 0.16 percent to $9,905 a tonne, while three-month aluminium was up 0.1 percent at $2,605 a tonne.
Copper prices had previously retreated sharply from record highs as oil prices rose, which analysts feared could dampen economic growth and hurt demand.
Among other commodities, ICE cocoa hit a fresh 32-year peak of $3,726 a tonne in early trading on Thursday as fighting spread in top producer Ivory Coast.
Explosions rocked a southern Abidjan suburb overnight and on Wednesday as fighting spread to new areas of the main city between insurgents seeking to oust Ivory Coast's Laurent Gbagbo and security forces.
"If this becomes more protracted, then the problems really start," a London-based broker said, adding that Ivory Coast's 2011-12 main crop is likely to be down on the previous year.
U.S. corn futures firmed a touch after the previous session's steep losses, while soybeans held onto gains on news that China may cut tariffs on some unspecified imports.
