* Arab media say Gaddafi looking for agreement to step down
* Brent's premium over WTI shrinks to $10 from $17 last week
* Algerian oil minister says market well supplied
* Coming Up: API U.S. oil inventory report; 2130 GMT
By Alejandro Barbajosa
SINGAPORE, March 8 (Reuters) - Brent crude fell below $115
on Tuesday on reports Libyan leader Muammar Gadaffi was looking
for a way to step down and end the fighting that has slashed the
nation's exports, and investors were also soothed by OPEC
assurances of supply to the market.
As much as 1 million barrels of Libyan output has been
disrupted by clashes between Gaddafi and rebels, or about
two-thirds of normal production. That is just above 1 percent of
global daily consumption.
Two Arab newspapers and al Jazeera television said on Monday
Gaddafi was looking for an agreement allowing him to step down,
but there was no official confirmation of the reports.
"I'm not surprised that Brent is running a little bit out of
steam," said Matthew Lewis, an analyst at CMC Markets in Sydney.
"In terms of the Libyan crisis, there is a lot of
speculation that perhaps Gaddafi is looking to extradite
himself. That may put an end to the crisis and the oil price
would fall fairly rapidly."
Algerian Oil and Energy Minister Youcef Yousfi told Reuters
that the market remained well supplied despite the cut in Libyan
exports and that OPEC members had no plans to meet for now.
"I think it is more psychological effect than physical
deficit of oil in the market," he said. "I don't think really
there is a deficit."
ICE Brent crude for April shed 35 cents to $114.69 a
barrel at 0303 GMT, after hitting $119.79 on Feb. 24, the
highest prices since 2008. U.S. crude on Tuesday slid 61
cents from a 2-1/2-year peak to $104.83.
U.S. crude closed above $105 on Monday, its highest since
September 2008, buoyed by traders who sold Brent and bought West
Texas Intermediate, unwinding a popular trade that had blown out
to a record $17 a barrel last week.
The Brent/WTI <CL-LCO1=R> spread has shrunk by more than $7
since then, ending Monday at its narrowest since January.
Concern has prevailed that violence and supply disruptions
may spread to other countries in the region.
But so far oil is flowing as usual from the world's biggest
producers in the Mideast Gulf. Saudi Arabia, the world's top
exporter and home to most of OPEC's spare capacity, has
increased production to at about 9 million barrels per day.
OPEC ministers are holding informal consultations about oil
prices and the Libyan crisis, but the group is not planning to
hold an emergency meeting, an OPEC delegate said on Monday.
If crude oil prices stay high for an extended time, analysts
said, Asian countries from China to India might not be able to
sustain the growth pace that has driven the global economy.
Major U.S. oil companies have halted trade with Libya and
big banks have started to pull back from funding such deals
because of U.S. sanctions, in moves that will further disrupt
oil flows from the torn country.
Major Libyan oil ports Ras Lanuf and Brega in the east of
the country are closed as violence in the area has hampered
operations at the terminals, shipping sources said on Monday.
But a coordinated release of strategic oil stocks by OECD
economies is not yet needed because the oil supply disruption
caused by an uprising in Libya remains limited on a global
scale, the International Energy Agency (IEA) said on Monday.
The White House said on Monday the price of oil was one
factor -- but not the only factor -- that would be used when
determining whether the United States will tap its strategic oil
reserve.
U.S. crude oil stockpiles could have risen modestly last
week as imports likely rose, a preliminary Reuters poll ahead of
weekly inventory reports showed on Monday.
On average, crude inventories added 300,000 barrels in the
week to March 4, after a surprise drawdown the week before, the
poll of nine analysts showed.
Gasoline stocks were forecast down 1.3 million barrels, on
average, as demand improved and imports likely fell, the
analysts said.
Distillate stocks, which include heating oil and diesel
fuel, likely dipped 1.3 million barrels, on average, with demand
likely higher on late winter cold.
The industry group American Petroleum Institute will issue
its weekly inventory report on Tuesday, at 2130 GMT, followed by
government statistics from the U.S. Energy Information
Administration on Wednesday, at 1530 GMT.
(Editing by Ed Lane)
