* Uncertainty surrounds Libyan truce declaration
* Yemen president declares state of emergency
* Coming up: U.S. existing home sales data Monday
(Updates U.S. trading volume, adds CFTC report details
paragraphs 7-8)
By Robert Gibbons
NEW YORK, March 18 (Reuters) - Oil prices slipped on Friday
after two days of gains, as Libya declared a ceasefire, easing
for the moment the threat of a Western air attack that could
escalate the conflict and further damage oil facilities.
Oil closed out a volatile week with yet another day of
below-average trading activity, as dealers remained reluctant
to place big bets in the face of Japan's ongoing nuclear crisis
and doubts that Muammar Gaddafi's truce would bring any swift
resolution to the month-long rebellion.
Another increase in China's rate reserve requirements and
continued unrest in countries bordering top oil exporter Saudi
Arabia further clouded the picture, keeping implied volatility
levels near their highest since June.
Brent crude futures for May delivery <LCOc1> fell 97 cents
to settle at $113.93 a barrel, falling sharply from an earlier
$117.29 peak after Libya's foreign minister declared "an
immediate stop to all military operations."
Despite Friday's price drop, Brent crude ended the week up
nearly 1 percent, after Japan's earthquake a week ago pressured
prices.
U.S. crude futures for April delivery <CLc1> fell 35 cents
to settle at $101.07 a barrel, off their high of $103.66, but
finding support just above the $100-a-barrel level. U.S crude
dipped only 9 cents from the prior week.
U.S. trading volume just above 600,000 lots, near or below
that level for the third time this week, underscored the deep
uncertainty facing the market. Traders have liquidated around 5
percent of their positions since last Friday, when open
interest in U.S. crude reached a record 1.6 million lots.
Speculators cut their net-long positions in U.S. crude
futures in the week to March 15, easing from a record high the
previous Tuesday, the U.S. Commodities Futures Trading
Commission said. []
Prices partly pared losses after President Barack Obama
warned Gaddafi to comply with U.N. demands for a no-fly zone or
else face consequences that include military action, echoing
comments from France and Britain that came amid reports of
continued attacks on rebel-held towns. [].
"This does not mean we are near a resolution of the
situation in Libya. We may be facing the possibility of an
entrenched status quo between pro- and anti-Gaddafi groups,"
said Harry Tchilinguirian, an 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 no-fly zone graphics http://link.reuters.com/wub68r
Western forces in region http://link.reuters.com/jen38r
Latest graphic: http://r.reuters.com/nym77r
Interactive factbox http://link.reuters.com/puk87r
Graphic on air bases http://link.reuters.com/zyk48r
Graphic on missile defences http://link.reuters.com/wem48r
Graphic on no-fly zone http://link.reuters.com/wub68r
More on Middle East unrest: [] []
Breakingviews-Crude bullied by black swans []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
VOLATILE MIDDLE EAST
While Libya's conflict pushed markets around, unrest in the
Middle East also provided uncertainty.
Yemen's president declared a state of emergency after at
least 25 protesters were killed at an anti-government rally.
[]
In Syria, a violent crackdown killed at least three
demonstrators on Friday. []
A crackdown by authorities in Bahrain against Shi'ite
protesters demanding reform from the Sunni monarchy drew
criticism from the United States and Iran.
Sunni-ruled Saudi Arabia, OPEC's top oil exporter, sent
troops into Bahrain this week along with other forces from the
Gulf Cooperation Council.
Eyeing the region's growing unrest, Saudi Arabia's King
Abdullah announced on Friday $93 billion in handouts and
boosted its security apparatus, but he made no mention of a
long-awaited cabinet reshuffle. []
Implied volatility, a gauge of how much prices are likely
to fluctuate based on options trading, spiked as the Libyan
conflict erupted a month ago, and has remained elevated since
then. At-the-money volatility stood at just above 40 percent on
Thursday, just off a peak 42.7 a week ago.
JAPAN'S NUCLEAR CRISIS
Oil prices came under pressure earlier in he day after
China's central bank said it would raise lenders' required
reserves, another move to rein in inflation that could dampen
oil demand. []
Japan's earthquake and tsunami a week ago, and the
resulting nuclear reactor crisis, caused oil prices to ease
some, after unrest in the Middle East and North Africa drove
oil prices to a 2-1/2-year highs, with Brent nearing $120 last
month.
Risk-averse sentiment increased as Japan struggled to
prevent catastrophic radiation releases from its quake-damaged
nuclear reactors, even as oil investors tried to assess the
short- and long-term impact the disasters will have on oil
demand and economic activity.
(Additional reporting by Gene Ramos in New York, Nia Williams
in London and Alejandro Barbajosa in Singapore; Editing by
Walter Bagley and Marguerita Choy)
