OIL FUTURES: Crude Eases As AU Seeks To Broker Libya Ceasefire

NEW YORK (Dow Jones) - Oil futures fell Monday as an African Union delegation arrived in Libya to negotiate a cease-fire, but traders remained cautious that the country's oil exports will resume soon.
Light, sweet crude for May delivery fell 57 cents, or 0.5%, to $ 112.22 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures left 69 cents, or 0.5%, to $ 125.96 a barrel.
Africa Union mediators arrived in the rebel stronghold of Benghazi on Monday to negotiate a cease-fire in their war of nearly two months with forces loyal to Colonel Muammar Gaddafi. The delegation said that Tripoli had accepted a peace plan, despite a rebel leader told AFP that the opposition will not accept a ceasefire unless "the people are free to go out and demonstrate in Tripoli."
The possibility of a ceasefire in Libya, which exported about 1. 3 million barrels per day of high quality crude pre-war, fueled soaring week pullback in oil prices after last.
"We follow what the trend is, and now the trend is that Libya is going to have a cease-fire," said Carl Larry, director of the Houston oil trading advisory firm Oil outlook and opinions. "We keep the flavor of the day, and now people are starting to think, 'Hey, this market is overbought."
However, some market participants expect a quick return of Libya's oil exports, and Monday's setback may be short lived if no cease-fire is reached. An economist with BP PLC (BP, BP.LN) said on Monday it could take years for the war-torn country to resume significant exports.
"For all purposes, Libyan exports ... are gone," said Christof Ruhl Dow Jones Newswires on the sidelines of a conference of industry in Perth.
Unrest in oil producing countries has been a key factor behind the rise of approximately 23% of Nymex oil futures prices this year. Besides Libya, traders are also closely watching Nigeria produces about 2.2 million bpd of high quality and is in the midst of national elections.
During previous elections, opposition groups have attacked oil infrastructure in the West African country, disrupting oil production. Although these attacks have been reported during the last election cycle, any reduction in oil exports could be detrimental to the oil market because of high quality "sweet" crude oil from Nigeria is seen as offsetting lower production in Libya.
"There is no shortage of crude oil in the world market, but there is a large deficit of oil, especially in Europe, which is usually the biggest beneficiary of sweet crude oil from Libya," said energy analyst with the Swedish bank SEB in report. "Any disruption to production in Nigeria would therefore have an exponential effect on the market for sweet crude."
Front-month May reformulated gasoline blendstock, or RBOB, recently traded up 0.6 percent, or 0.2%, to $ 3.2547 a gallon. May heating oil futures gave up 1.94 cents, or 0.6%, to $ 3.3003 a gallon.

(Source: http://online.wsj.com/article/BT-CO-20110411-707491.html)