Oil prices fell today after the Libyan foreign minister said Libya would halt all military action and accepted a UN resolution for an immediate ceasefire.
Brent crude was trading 92 cents lower at $113.98 by 1318 GMT, off a session high of $117.29 and up from the day's low of $113.07. US crude shed 59 cents to $100.83.
"We decided on an immediate ceasefire and on an immediate stop to all military operations," Libyan foreign minister Moussa Koussa told reporters.
The announcement followed a United Nations meeting yesterday in which the security council authorised Western-led military intervention against Muammar Gadafy who had vowed to crush a rebel uprising in the country.
The U.N. also authorised "all necessary measures" – code for military action - to protect civilians against Col Gadafy's forces.
Oil markets had risen to their highest in more than a week following the UN resolution and, although the ceasefire triggered a sell-off, analysts noted the situation was still complex.
"This does not mean we near a resolution of the situation in Libya. We may be facing the possibility of an entrenched status quo between pro and anti Gadafy groups," said Harry Tchilinguirian, analyst at BNP Paribas.
"This only maintains the uncertainty in terms of when we will eventually have a full resumption of production in Libya."
Libya pumped 1.6 million barrels per day (bpd) of sweet, light crude before violent unrest broke out earlier this year.
The situation was also still volatile in Bahrain, where earlier this week the authorities cracked down on Shia protesters demanding reform by the Sunni monarchy, drawing criticism from the United States and Iran.
Sunni-ruled ally Saudi Arabia, Opec's largest oil producer, has sent troops into Bahrain, together with other forces from the Gulf Cooperation Council (GCC).
As it monitors unrest in its oil-producing east, home to its Shia minority, Saudi Arabia today announced billions of dollars in handouts for its people and boosted its security apparatus.
Concern about unrest in the Middle East drove oil prices to a two and a half year high of nearly $120 last month, but they lost some of their strength after Japan's strongest earthquake on record a week ago.
The resulting nuclear crisis sent risk-averse sentiment coursing through global financial markets.
Engineers said today burying a crippled nuclear plant in sand and concrete might be the only way to prevent a catastrophic radiation release, the method used to seal huge leakages from Chernobyl in 1986.
Edward Meir, senior commodities analyst at brokers MF Global, said oil prices had risen too far considering the loss of demand from Japan, the world's third largest economy and third biggest oil consumer after the United States and China.
"The extended paralysis with regard to the nuclear issue and the colossal damage sustained in the rest of the country, suggests that Japan will be partially absent from the oil markets for some time to come," he said.
Reuters
