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Email ArticleBrent crude fell below $126 on Monday after the African Union (AU) said Muammar Gaddafi had accepted a roadmap to end the civil war in Libya including an immediate ceasefire in the North African producer.
South African President Jacob Zuma, who led a delegation of African leaders at talks in Tripoli, met Gaddafi for several hours. The issue of Gaddafi's stepping down had also been discussed, the AU said.
Top oil exporter Saudi Arabia reiterated its position during the weekend that its "huge" spare output capacity allows it to meet any rise in demand or a drop in supplies.
The country would have "no problems" producing at its claimed 12,5-million barrels per day (bpd) capacity if the market needed the oil, a senior Gulf source told Reuters on Sunday.
ICE Brent crude for May fell 92c to $125,73 a barrel by 0431 GMT after hitting an intraday low of $125,54.
The contract surged on Friday to settle above $126 a barrel, the highest level in 32 months, as commodities rallied due to a weaker dollar and as continued fighting in Libya raised fears of longer-term supply cuts.
US crude for May delivery fell 6c to $112,73 a barrel.
Peace talks in Libya, where the unrest has been supporting oil prices, are "definitely going to weigh on the oil market," ANZ analyst Serene Lim said.
"We have seen quite a strong rally last Friday," she said, adding that prices could be "consolidating and taking a breather".
The market was also watching the outcome of a bailout for Portugal which could be bearish for oil if it does not go smoothly, Lim said.
EU finance ministers on Saturday urged Portugal to commit to reforms and defended the region's austerity steps as tens of thousands of European workers protested in Budapest against spending cuts.
MIDEAST UNREST, ECONOMIC RECOVERY SUPPORTS
Unrest in other parts of Africa and in the Middle East that could disrupt oil supplies is still a key concern among investors.
Oil could rise more if US companies post good earnings showing a strong economic recovery in the world's largest oil consumer, analysts said.
"I don't see any factors to push the market down," Ken Hasegawa, commodities sales manager at Newedge Japan said. "Oil is on its way to the historical high of $147."
Dozens of unemployed university graduates and teachers staged rare protests in two Saudi cities on Sunday to demand jobs and better wages in the biggest Arab economy, which is struggling to reduce joblessness.
In Syria, a crackdown on popular dissent now in its fourth week killed three people on Sunday while Gulf Arab countries called on Yemen's President Ali Abdullah Saleh to hand over power to his vice president and allow the opposition to lead a transition government that would prepare new elections.
Africa's most populous nation Nigeria, which produces 1,9-million barrels a day of oil, has started counting votes on Sunday despite a chaotic and violent run-up.
