Oil fell for the first time in three days as speculation that fighting may subside in Libya eased concern supply cuts will spread through the Middle East. Crude slid as much as 0.9 percent after al-Jazeera reported an offer by Libya’s Muammar Qaddafi to relinquish power in return for safe passage. Goldman Sachs Group Inc. increased its forecast for Brent crude in the second quarter of the year to $105 a barrel as OPEC spare capacity shrinks amid Libya’s output disruptions. A report tomorrow may show U.S. crude inventories rose 1 million barrels last week. “There’s a sense in the market that the civil unrest will ease and oil will probably collapse,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. Prices may slip to $85 a barrel should the market start focusing on U.S. inventories, he said. Crude for April delivery fell as much as 97 cents to $104.47 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.85 at 1:42 p.m. Singapore time. Yesterday, the contract settled at $105.44, the highest since Sept. 26, 2008. Prices are up 28 percent from a year ago. Brent crude for April settlement slipped 44 cents, or 0.4 percent, to $114.60 a barrel on the London-based ICE Futures Europe exchange. That widened the spread between the European benchmark and New York-traded West Texas Intermediate to $9.71 a barrel from $9.60 yesterday. Goldman Forecast Goldman Sachs raised its outlook for Brent by $4.50 a barrel on estimates that spare capacity in the Organization of Petroleum Exporting Countries has dropped below 2 million barrels a day, according to a report dated March 7. Violence has cut output in Libya by as much as 1 million barrels a day, according to the International Energy Agency. The North African country pumped 1.59 million barrels a day in January, Bloomberg News estimates show. Technical indicators showed New York oil futures were “overbought” for a sixth day. Crude’s 14-day relative strength index was at 75.5 from 77.6 yesterday, Bloomberg data showed. A reading of 70 typically indicates prices are set to retreat, while 30 suggests they may rise. “We are in a desperate position here, in terms of trying to hedge this market,” Peter Beutel, president of Cameron Hanover Inc., an energy adviser in New Canaan, Connecticut, said in a note. “Prices are really too high, too overbought and too susceptible to a sell-off to buy.” U.S. crude stockpiles increased in six of the last seven weeks, according to government data. Inventories probably rose 1 million barrels last week from 346.4 million in the previous period, according to the survey. Five of the analysts anticipated a gain and four projected a decline. Offer Rejected The interim rebel council in Libya rejected Qaddafi’s offer, al-Jazeera reported, without saying how it obtained the information. Libyan government warplanes repeatedly bombed rebel positions near the oil hub of Ras Lanuf yesterday. Demonstrations have toppled leaders in Tunisia and Egypt and there have been protests in countries including Iran, Yemen and Oman. In Saudi Arabia, the biggest oil producer in the Organization of Petroleum Exporting Countries, websites have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch. The turmoil, which has pushed Brent close to $120 a barrel, has driven holdings of the European benchmark grade to the lowest level in five months relative to New York oil futures. Open Interest The ratio of open interest, the number of contracts that haven’t been closed or delivered, in Brent to those for West Texas Intermediate on the New York Mercantile Exchange tumbled to 55 percent on March 2, the lowest level since Sept. 22, according to data compiled by Bloomberg. It was 66 percent as recently as Jan. 21. Oil climbed to a record $147.27 a barrel on July 11, 2008, before plunging 78 percent in the next five months to a low of $32.40 as the financial crisis unfolded. The prices of oil products have surged amid the Libyan unrest. Gasoline advanced 11 percent on the New York Mercantile Exchange last week. Futures for April delivery dropped today, sliding as much as 0.6 percent to $2.9871 a gallon. An Energy Department report tomorrow will probably show U.S. gasoline inventories dropped 2 million barrels from 234.7 million, according to the Bloomberg News survey. It will be a third week of declines. To contact the reporter on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net

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