Oil dropped the most in a week in New York after the Arab League said it is studying ways to end the crisis in Libya that 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, as an Arab League official said the group has consulted with Venezuela on the plan, which involves sending mediators to the North African country. Libya’s Muammar Qaddafi and Venezuelan President Hugo Chavez have discussed resolving the crisis, the Associated Press reported. Oil prices may be starting to hurt global economic growth, said Adam Sieminski, chief energy economist at Deutsche Bank AG.
“The market perception is if there’s an end to the crisis, there won’t be any potential supply shock,” Pearlyn Wong, a Singapore-based investment analyst at Bank Julius Baer Group Ltd., said in a telephone interview in Singapore today. “This will reduce the pressure on oil prices because without supply shock, there would be enough inventory to meet current demand.”
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 $101.09 at 4:05 p.m. in Singapore. The contract earlier rose as much as 71 cents after settling yesterday at $102.23, the highest since Sept. 26, 2008.
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. The contract earlier advanced as much as 0.5 percent.
Arab League
There are no deadlines to agree on the Arab League’s proposal, Hesham Youssef, chief of staff for the group’s secretary general, Amre Moussa, said in a phone interview today. Venezuela is also discussing the plan with other countries, he said.
Oil surged yesterday on concern the turmoil curbing exports from Libya will spread to the Middle East, disrupting more supplies. Violence has cut Libyan oil production by as much as 1 million barrels a day, according to the International Energy Agency.
Qaddafi’s warplanes bombed rebels yesterday as his ground forces fought unsuccessfully for a major Libyan oil port and opposition leaders appealed for foreign nations to launch air strikes against regime mercenaries. Libya pumped about 1.6 million barrels a day in January, according to Bloomberg estimates.
“These high prices are beginning to weigh on the minds of central bankers who are worried about what it might be doing to inflation,” Washington-based Sieminski said in an interview with Phillip Yin on Bloomberg Television. “As oil gets up to $120 a barrel it begins to impinge on global economic activity.”
Middle East
Demonstrations have toppled leaders in Tunisia and Egypt, while there have been protests in countries including Iraq, Iran, Yemen, Oman and Saudi Arabia, the Organization of Petroleum Exporting Countries’ biggest oil producer. Websites have called for a nationwide Saudi “Day of Rage” on March 11 and March 20, according to Human Rights Watch.
Oil also declined 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.
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