Oil Declines for First Time in Three Days After Qaddafi Resignation Offer

Oil fell for the first time in three days after a report that Libya’s Muammar Qaddafi offered to relinquish power prompted speculation fighting may ease in Africa’s third-biggest producer.

Crude dropped as much as 0.9 percent after al-Jazeera reported the proposal that guaranteed safe passage for the leader and his family. The interim rebel council rejected the offer, the TV channel said, without stating how it obtained the information. An Energy Department report may show U.S. crude inventories rose 1 million barrels last week, according to a Bloomberg News survey of analysts.

“There’s a sense in the market that the civil unrest will ease and oil will probably collapse,” saidJonathan 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 theNew York Mercantile Exchange, and was at $105.01 at 12:19 p.m. Sydney time. Yesterday, the contract gained $1.02 to $105.44, the highest settlement since Sept. 26, 2008. Prices are 28 percent higher from a year ago.

Brent crude for April settlement slipped 9 cents, or 0.1 percent, to $114.95 a barrel on the London-based ICE Futures Europe exchange. The European benchmark closed at a $9.60 premium to New York-traded West Texas Intermediate yesterday.

Relative Strength

Technical indicators showed New York oil futures were “overbought” for a sixth day. Crude’s 14-day relative strength index was at 76.6 from 77.6 yesterday, Bloomberg data showed. A reading of 70 typically indicates prices are set to retreat, while 30 suggests they may rise.

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.

Oil in New York fell on March 3 after Venezuela offered to mediate Libya’s conflict. Violence has cut output in the North African country by as much as 1 million barrels a day, according to theInternational Energy Agency. Libya pumped 1.59 million barrels a day in January, Bloomberg News estimates show.

“The market is going to get a bit nervous about the Qaddafi offer, although the last statement we had where Venezuela stepped in came to nothing,” Barratt said. “We may get a quick step down to $102.”

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.

Oil surged 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.

(Source: http://www.bloomberg.com/news/2011-03-08/oil-rises-to-29-month-high-citigroup-sees-fear-premium-in-brent-price.html)