Oil prices fell to near $101 a barrel Thursday in Asia amid efforts toward a mediated resolution to the conflict in Libya which has cut crude supplies by more than half from the OPEC nation.
Benchmark crude for April delivery was down $1.06 at $101.17 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract added $2.60 to settle Wednesday at $102.23, the highest settlement since Sept. 26, 2008.
In London, Brent crude for April delivery was down $1.50 to $114.85 a barrel on the ICE Futures exchange.
President Hugo Chavez has spoken with Moammar Gadhafi about creating a bloc of friendly countries to help mediate a resolution to Libya's crisis, Venezuela's information minister said Wednesday. Venezuelan officials did not say how Gadhafi had responded to the proposal.
"If Libya comes back to some kind of normalcy, we could see Brent drop back to $100," said David Cohen, an economist with Action Economics in Singapore.
The International Energy Agency said Wednesday that a power struggle between supporters and opponents of Gadhafi had cut up to 1 million barrels per day of crude production, more than the group's previous estimate of as much as 750,000 barrels per day.
Traders are also factoring in the possibility that political upheaval in other oil-rich countries could pinch global crude supplies.
"The spread of protests into other major oil producing nations such as Oman, Algeria and especially Saudi Arabia could keep this oil market on a boil for some time to come," Ritterbusch and Associates said in a report.
Analysts said sustained oil prices above $100 would eventually undermine consumer demand and threaten global economic growth.
With oil prices "at these elevated levels, the current global economic recovery is at significant risk of stalling," said Richard Soultanian of NUS Consulting.
In other Nymex trading in April contracts, heating oil rose 3.1 cents to $3.03 a gallon and gasoline fell 3.7 cents to $2.99 a gallon. Natural gas futures were up 0.2 cent at $3.82 per 1,000 cubic feet.