* Revolt has wiped out around half of Libya's oil output
* Arab League says Libyan peace plan under consideration
* Investors eye growing instability in MidEast, N. Africa
(Updates throughout, previous SINGAPORE)
By Christopher Johnson
LONDON, March 3 (Reuters) - Oil prices slipped on Thursday,
dropping by more than $3 briefly before recovering, after the
Arab League said a peace plan for Libya was under consideration.
The uprising against Muammar Gaddafi has reduced Libya's oil
production by around half, industry officials estimate, and
anything that helped restore output would help calm oil markets.
But traders were sceptical over the prospect of any
immediate end to fighting in Libya, where Gaddafi faces an
increasingly organised and confident rebel army. []
Brent crude futures for April <LCOc1> hit an intra-day low
of $113.09 a barrel, down over $3 on the day, before recovering
to around $116 by 0900 GMT.
U.S. crude <CLc1> was down 30 cents at $101.93 by 0900 GMT,
after hitting a low of $100.37. It had settled at $102.23 a
barrel in the previous session, ending above $100 for the first
time since September 2008.
"News of the 'peace plan' for Libya obviously knocked the
market lower but it doesn't seem to be having more than a
passing impact on prices, which will probably head higher
again," said Cartsen Fritsch, commodities analyst at Commerzbank
in Frankfurt.
Arab League Secretary-General Amr Moussa said on Thursday a
peace plan for Libya from Venezuela's President Hugo Chavez was
"under consideration". []
News network Al Jazeera said earlier the plan would involved
a commission from Latin America, Europe and the Middle East
trying to reach a negotiated outcome between Libyan leader
Muammar Gaddafi and rebel forces for this North African
oil-producing country. []
But Moussa said he did not know if Gaddafi had accepted the
plan and, when asked if he had agreed the plan, Moussa replied:
"No."
RISK OF CONTAGION
Revolt has ripped through the world's 12th-largest oil
exporter and knocked out around half of its 1.6 million barrels
per day (bpd) output.
Oil output of Libya, a member of the producer cartel OPEC,
has fallen to 700,000-750,000 barrels per day (bpd) as most of
the industry's foreign workers had taken flight after the crisis
began, according to Shokri Ghanem, the head of the North African
producer's state oil company. [].
Wednesday fighting centred around a Libyan oil terminal.
Concern the conflict might disrupt more Libyan output and
that protest in the region may interrupt supply from other major
producers has spurred oil prices to two-and-half-year highs.
Brent rose to near $120 a barrel on Feb. 24.
A drawn-out battle between rebels and pro-Gaddafi supporters
in Libya could push oil prices above $130 a barrel, Ghanem said.
"The market still sees the risk of contagion to neighbouring
countries like Algeria which produced 1.2 million barrels per
day (bpd) in January," a BNP Paribas research note said.
"Should Algeria be affected, OPEC's spare capacity stands to
be significantly curtailed if it were to meet the additional
shortfall in supply."
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Reuters Insider show on Ghanem interview:
http://link.reuters.com/jys38r
Graphics showing:
Middle East unrest http://r.reuters.com/nym77r
Who is in control in Libya http://r.reuters.com/jem28r
Map of control in Libya http://r.reuters.com/fug38r
Countries most reliant on oil http://r.reuters.com/dux28r
Calculator: Oil price impact on GDP
http://r.reuters.com/jux28r
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(Editing by William Hardy)
