NEW YORK (AP) — Oil prices plunged Friday after Libya 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. Despite his announcement there were reports that fighting continued in some parts of the country.
Benchmark crude dropped on the New York Mercantile Exchange after the cease-fire announcement, tumbling $2.51 in 15 minutes, or nearly 3 percent. At midday West Texas Intermediate oil for April delivery was down 79 cents at $100.63.
In London, Brent crude lost $1.16 at $113.49 per barrel on the ICE Futures exchange.
Friday's drop was just the latest turn in an especially volatile market. 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 heavyweights Saudi Arabia and Iran, and it produces 27 percent of the world's oil.
Early Friday crude prices climbed as the U.N. no-fly zone announcement 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.
Still, oil prices remain well above where they were before the Libya uprising. The rebellion continues to cut off most of Libya's oil exports, which previously satisfied nearly 2 percent of world demand at 1.5 million barrels per day. Oil traders say they're also worried that the U.N. action, combined with growing unrest in Bahrain and Yemen, will further erode trade relations between OPEC and the West.
Yemeni security forces shot at anti-government demonstrators Friday, killing at least 31 people. And a senior Iranian cleric urged Bahrain's Shiites to keep up their protests against the Sunni monarchy "until you die or win."
The recent jump in oil has hit energy markets as the global economy gradually recovers from recession. Higher prices resulted in a surprise trade deficit last month in China and helped keep U.S. gas pump prices at the highest levels ever for this time of year.
Economists say the rise in oil prices has hurt oil and gas demand in the U.S., the world's largest petroleum consumer. The Energy Information Administration said total petroleum demand in the U.S. dropped in the first two weeks of March by 200,000 barrels per day.
Moody's Investors Services said if oil stays above $100 per barrel, it will further weaken the global economic recovery. The price of oil, coal and natural gas could rise as Japan rebuilds and increases imports to make up for power generation lost from damaged nuclear reactors. Most of Japan's power — about 28 percent — comes from coal-fired plants. More than 50 nuclear reactors provide roughly 27 percent of the country's power.
Higher oil prices have also pushed up airfares around the world, and food prices could rise as costs increase for fertilizers and fuel to run farm equipment and to transport produce, Moody's said. Automakers in Japan and elsewhere could see sales lag because of higher fuel prices.Comment on this story
Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said the international crises have totally rattled energy markets, and prices will continue to jerk up and down with every major headline.
"I've been trading oil commodities for 37 years and I've never seen such a vast array of items that this market has to digest each and every day," Ritterbusch said.
In other Nymex trading for April contracts, heating oil fell 4 cents to $3.0262 per gallon and gasoline futures lost a penny at $2.9372 per gallon. Natural gas gave up 2 cents at $4.176 per 1,000 cubic feet.