Oil lower moves back toward $112 a barrel

SAN FRANCISCO (MarketWatch) — Crude-oil futures fell from a 30-month high Monday on a possible peace agreement in Libya and as the U.S. dollar traded stronger.

Light, sweet crude for May delivery (CLK11 111.94, -0.85, -0.75%) declined 72 cents, or 0.6%, to $112.08 a barrel on the New York Mercantile Exchange. It had moved as low as $111.53 in electronic trading.

Gadhafi meets with African leaders

A delegation from the African Union meets with Libyan leader Moammar Gadhafi over the weekend in a diplomatic effort to stop the bloodshed in Libya. Video courtesy of Reuters.

Oil closed at its best since September 2008 on Friday, rising by 2.3% on the session and by 4.5% for the week.

Prolonged geopolitical uncertainty and violence in North Africa and the Middle East have been a driving factor behind the soaring oil price.

There were reports Monday that embattled Libyan leader Col. Moammar Gadhafi had agreed to a cease-fire put forward by the African Union.

The reports cited South African President Jacob Zuma as saying Gadhafi had accepted a peace plan to end the conflict in Libya, which began after violent protests broke out in February. See report on Libyan peace plan.

Elsewhere across the Middle East, however, political unrest raged over the weekend, with dozens killed and many left wounded. Read more about unrest in the Middle East

Security forces in Syria killed dozens of protesters over the weekend, according to media reports. Demonstrators in Yemen were also met with gunshots and tear gas Friday and Saturday.

And in Egypt, two were dead and dozens injured after the Army cleared protesters from Cairo’s Tahrir Square, according to news reports. Protesters still occupied the square on Monday.

In Japan, a strong aftershock rattled Japan one month after the massive earthquake that triggered a tsunami and devastated swaths of northeast Japan.

The aftershock cut power supplies to the crippled Fukushima Daiichi nuclear plant, but officials resumed efforts to keep the plant’s reactors properly cooled after power was restored. Also, Japanese officials expanded the evacuation zone around the facility. Read more about Japan's aftershock.

In currencies, the dollar left behind last week’s steep losses after the U.S. government managed to avert a partial shutdown with a last-minute budget deal struck late Friday. The dollar index (DXY 75.00, -0.07, -0.09%)  was at 74.954, up from 74.892 on Friday. See more on trading in the dollar, euro and other global currencies.

A stronger dollar is detrimental to dollar-denominated commodities as it makes them more expensive for holders of other currencies, diminishing their appeal.