* Oil drops as Arab League says Libya peace plan floated
* Upbeat U.S. data boosts stocks after Wednesday drop
* Euro steady on dollar, underpinned ahead of ECB
(Adds oil reaction to Arab League comment on Libya plan)
By Ian Chua
SYDNEY, March 3 (Reuters) - Oil prices dropped on Thursday
as the Arab League said a peace plan for Libya put forward by
Venezuela's Hugo Chavez was under consideration, while upbeat
U.S. economic news helped lift Asian stock markets.
U.S. stock index futures were firmer, pointing
to a higher opening on Wall Street, which eked out small gains
on Wednesday.
Brent crude futures fell more than $3 a barrel to an
intraday low of $113.09 after the head of the Arab League said a
peace plan for Libya, proposed by Chavez, was under
consideration.
However, Brent quickly retraced some of the losses to stand
at $114.67, down 1.4 percent on the day.
"We have been informed of President Chavez's plan but it is
still under consideration," Amr Moussa, the secretary-general of
the Arab League, told Reuters by telephone on Thursday.
"We consulted several leaders yesterday," he said, without
providing a deadline to decide on the plan.
When asked if Muammar Gaddafi had accepted the plan, Moussa
said: "I don't know, how am I supposed to know that?"
In answer to a question on whether he had agreed to the
Chavez plan, Moussa said: "No."
U.S. crude fell 1.2 percent to $101, after hitting a
high of $102.94.
News of the plan comes as Gaddafi's Libyan army faced an
increasingly organised and confident rebel force which is
appealing for international support and looking to take its
military successes west towards the capital Tripoli.
Oil investors are concerned that growing instability in
Middle East oil producers if public protests against incumbent
leaders spread, could threaten global supplies.
Bank of America Merrill Lynch analysts argue the oil shock
from Libya ranks as the eighth largest supply shock since 1950.
"The stability of the region has gone through a major shock
and the ripples are going to be felt for a while," said Carl
Larry, president of Oil Outlooks and Opinions based in Houston.
Gold, often sought in times of heightened geopolitical
tensions and as an inflation hedge, slipped to around $1,424 an
ounce , down from a record high just above $1,440.
Tokyo's Nikkei average closed 0.9 percent higher, a
day after it suffered its biggest fall this year, while stocks
elsewhere in Asia were 1 percent firmer.
"It's too early to be optimistic because concerns about
rising oil prices will likely persist," Masumi Yamamoto, a
market analyst at Daiwa Securities Capital Markets, cautioned.
"But investors might have oversold yesterday, so they may
buy back stocks with good fundamentals."
South Korea's KOSPI , which plumbed a three-month low
on Wednesday, was among the best performers in the region,
advancing 2.2 percent on the day.
Hong Kong's Hang Seng index was modestly higher,
while the Shanghai Composite Index was slightly lower.
Wall Street eked out small gains on Wednesday with the S&P
500 index ending 0.2 percent higher after the Federal
Reserve's Beige Book suggested economic activity picked up in
2011 and a private survey pointed to strong private-sector
hiring.
The private-sector jobs report bodes well for the
influential non-farm payrolls data due on Friday.
EURO PINS HOPES ON ECB
In the currency market, the euro held its ground against the
dollar after rallying to near four-month highs. The single
currency is expected to stay supported ahead of the European
Central Bank policy meeting.
Markets expect the ECB to sharpen its anti-inflation
rhetoric, reinforcing views the ECB will raise interest rates
before the U.S. Federal Reserve.
The euro last traded at $1.3866 , having climbed as
high as $1.3890. The dollar index , which tracks its
performance against a basket of major currencies, was little
changed on the day at 76.69. It fell to 76.529 overnight, its
lowest level since early November 2010.
Still, some analysts warn the rally in the euro will
probably fizzle after the ECB meeting.
"There has been a lot of hype in the market on the ECB for
some time, so I expect the euro to lose steam pretty much
regardless of what the ECB does today," said Teppei Ino,
currency analyst at the Bank of Tokyo-Mitsubishi UFJ.
(Additional reporting by Luke Pachymuthu in Singapore and Ayai
Tomisawa and Hideyuki Sano in Tokyo; Editing by Tomasz Janowski
and Neil Fullick)
