Oil futures moved lower after Venezuelan President Hugo Chavez proposed a multinational commission mediate the violent conflict between Libyan leader Moammar Gadhafi and rebel groups.
The proposal raised hopes that a peaceful resolution could be found, even as Mr. Gadhafi's forces bombed the rebel-held oil refinery town of Brega and the country's oil production continued to decline. Oil futures fell sharply after news network Al Jazeera reported Col. Gadhafi had accepted Mr. Chavez's plan, though prices have since recovered most of those losses.
In late morning, the front-month April Brent contract on London's ICE futures exchange was down $1.05 at $115.30 U.S. a barrel. The front-month April contract on the New York Mercantile Exchange was down 34 cents at $101.89 U.S. a barrel.
The uncertainty surrounding Col. Gadhafi's response to the offer "helped the market to settle a bit, and prices have been treading water," said Simon Wardell from IHS Global Insight. "But it's a question of wait-and-see now. Normally markets aren't confident of such plans."
News of continued violence in Libya and protests in other countries across the Middle East and North Africa are renewing fears about further potentials disruption to global oil supplies.
International Energy Agency chief Nobuo Tanaka said Thursday the current level of oil prices could hamper the global economic recovery this year, a day after the organization said the Libyan crisis had caused more oil production to be halted than initially forecast.
Between 850,000 and one million barrels a day of Libyan crude output has gone offline, the IEA said Wednesday, more than the agency's previous estimate of up to 750,000 barrels a day.
Mr. Tanaka said if oil remains at $100 U.S. a barrel, this could have a "very significant undermining effect on the health of economic growth, especially for emerging developing economies."
He also said that should the necessity arise, IEA member countries remain ready to release 1.6 billion barrels of strategic oil stocks "at any time."
Oil prices remaining near $110 U.S. a barrel would constitute a "mild oil shock," and could reduce global economic growth by 0.4%-0.5%, analysts with Deutsche Bank said in a report. If other major producers, such as Saudi Arabia, are forced to cut output as well, prices could hit $150 and slash growth by 2%, the analysts said.
In late morning, ICE gasoil for March traded at $959.50 a metric ton, down $5.25 U.S. from Wednesday's settlement. Nymex reformulated gasoline blendstock for April fell 3.30 points to $2.9965 U.S. a gallon.
