Oil prices tumble as Libya declares cease-fire

Oil prices plunged at the weekend after Libya�s foreign minister declared a cease-fire and said the government would stop military operations against rebels.

Foreign Minister Moussa Koussa announced the cease-fire Friday, shortly after the U.N. voted to authorize a no-fly zone and “all necessary measures,” including airstrikes, to protect Libyan citizens from forces loyal to Moammar Gadhafi.

Koussa said the cease-fire “will take the country back to safety” and ensure security for all Libyans.

Benchmark crude swiftly dropped afterward on the New York Mercantile Exchange, with the price plunging about $3 in 15 minutes, or nearly 3 percent. West Texas Intermediate oil for April delivery fell 57 cents to $101.85 in morning trading on the Nymex.

The immediate drop in oil prices in response to events in Libya raised concerns at Abuja over the sustainability of the $75 per barrel oil benchmark for the 2011 budget which was passed last week.

Lawmakers were said to have predicted an above $80 per barrel for crude oil throughout the 2011 fiscal year hence the $75 benchmark.

But in London weekend, Brent crude lost 55 cents at $114.10 per barrel on the ICE Futures Exchange.

Oil prices surged as much as 27 percent in the past month as pro-reform uprisings swept through North Africa and the Middle East, ousting leaders in Tunisia and Egypt. The region is home to OPEC leaders Saudi Arabia and Iran, and it produces 27 percent of the world�s oil. Prices rose on concerns unrest could disrupt global oil supplies.

The rise in oil prices was felt at gasoline stations across the U.S., where pump prices jumped and remain at the highest levels ever for this time of year at $3.54 per gallon.

Crude prices were climbing early Friday as the no-fly zone raised concerns that military units from the U.S. and Europe would be pulled into the crisis. “Now that doesn�t seem as much a possibility,” said Addison Armstrong, director of market research at Tradition Energy.

In other Nymex trading for April contracts, heating oil fell 3 cents to $3.0385 per gallon and gasoline futures were unchanged at $2.9506 per gallon. Natural gas lost 2 cents at $4.133 per 1,000 cubic feet.

Source : Daily Champion