UPDATE 6-Brent slips below $116 on Libya peace plan talk

                                
 * Revolt has wiped out around half of Libya's oil output
                                
 * OPEC concerned but has ample oil to cover shortfall - Iraq
                                
 * Arab League says Libyan peace plan under consideration
                                
 * Rebels show no intention of negotiating with Gaddafi
 
                                
 (Updates prices, detail, comment)
                                
 By Christopher Johnson
                                
 LONDON, March 3 (Reuters) - Oil prices slipped on Thursday,
dropping by more than $3 briefly before recovering, after the
Arab League said a peace plan for Libya was under consideration.
                                
 The uprising against Muammar Gaddafi has reduced Libya's oil
production by around half, industry officials estimate, and
anything that helped restore output would help calm oil markets.
                                
 But analysts and traders were sceptical over the prospect of
any immediate end to fighting in Libya, where Gaddafi faces an
increasingly organised and confident rebel army. [ID:nLDE72200E]
                                
 Iraqi Oil Minister Abdul-Kareem Luaibi said the Organization
of the Petroleum Exporting Countries was concerned about the
turmoil in Libya but had sufficient oil to cover any shortfall
caused by the rebellion there. [ID:nLDE7220ON]
                                
 Brent crude futures for April <LCOc1> hit an intra-day low
of $113.09 a barrel, down over $3 on the day, before rebounding
to around $115.40 by 1205 GMT.
                                
 U.S. crude futures for April <CLc1> were down 55 cents at
$101.68 by 1205 GMT, after hitting a low of $100.37. The
contract settled at $102.23 a barrel in the previous session,
ending above $100 for the first time since September 2008.
                                
 "The 'peace plan' for Libya obviously knocked the market
lower but it doesn't seem to be having more than a passing
impact on prices, which will probably head higher again," said
Cartsen Fritsch, analyst at Commerzbank in Frankfurt.
                                
 Arab League Secretary-General Amr Moussa said on Thursday a
peace plan for Libya from Venezuela's President Hugo Chavez was
"under consideration". [ID:nLDE72200E]
                                
 News network Al Jazeera said earlier the plan would involved
a commission from Latin America, Europe and the Middle East
trying to reach a negotiated outcome between Libyan leader
Muammar Gaddafi and rebel forces for this North African
oil-producing country. [ID:nLDE72200E]
                                
 
                                
 RISK TO LIBYAN INFRASTRUCTURE
                                
 But analysts said they saw little chance any Chavez-backed
plan would succeed and said they were worried about damage to
Libyan oil infarstructure as a result of the fighting.
                                
 "I don't think that another relatively extreme leader who is
an ally to Gaddafi has a chance to be accepted as a
peace-broker. It's very unlikely to work," said Samuel Ciszuk,
Middle East analyst at IHS Energy in London.
                                
 "It has become likely that Libyan fighting will affect, and
potentially destroy, oil infrastructure serving the country's
largest, central basin, which is right on the fault line between
Gaddafi loyalists and rebels."
                                
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 Reuters Insider show on Libyan oil company head interview:
                                
 http://link.reuters.com/jys38r
                                
 Graphics showing:
                                
 Middle East unrest             http://r.reuters.com/nym77r
                                
 Oil price shocks               http://r.reuters.com/qes28r
                                
 Countries most reliant on oil  http://r.reuters.com/dux28r
                                
 Calculator: Oil impact on GDP  http://r.reuters.com/jux28r
                                
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
                                
 Revolt has ripped through the world's 12th-largest oil
exporter. Libyan output has fallen to 700,000-750,000 barrels
per day (bpd) as most foreign oil workers had taken flight,
according to Shokri Ghanem, the head of the North African
producer's state oil company. [ID:nSGE72103H].
                                
 Concern the conflict might disrupt more Libyan output and
that protest in the region may interrupt supply from other major
producers has spurred oil prices to two-and-half-year highs.
Brent rose to near $120 a barrel on Feb. 24.
                                
 A drawn-out battle between rebels and pro-Gaddafi supporters
in Libya could push oil prices above $130 a barrel, Ghanem said.
                                
 "The market still sees the risk of contagion to neighbouring
countries like Algeria which produced 1.2 million barrels per
day (bpd) in January," a BNP Paribas research note said.
                                
 "Should Algeria be affected, OPEC's spare capacity stands to
be significantly curtailed if it were to meet the additional
shortfall in supply."
 (Editing by William Hardy)