The main story overnight, which has cut gains in precious metals and oil, and set futures surging is a bizarre rumor that Venezuelan dictator Hugo Chavez has proposed a Libyan peace plan which is being considered by the Arab League. "Oil prices were lower on Thursday as speculation a peace deal may be brokered for Libya prompted some investors to cash in gains, but the market remained elevated on concerns over ongoing unrest in the region. A report the Arab League was considering a peace plan for Libya proposed by Venezuelan President Hugo Chavez led some players who had bet on rising prices to close their positions overnight." In terms of credibility and actual practicality, this story has about the same weight as the false rumor spread last week that Gaddafi was shot. But the desperate market will take any myth that sends it surging and run with it. "As for the proposed peace plan, Arab League Secretary-General Amr Moussa told Reuters, "We have been informed of President Chavez's plan, but it is still under consideration." Analysts were sceptical the plan would lead to peace. "It is doubtful that the protesters in Libya will agree to enter negotiations with Gaddafi as the plan of Venezuelan President Chavez suggests," Commerzbank said in a note." So while a US aircraft carrier is happily swimming toward Libya (fact), stocks once again bury their head in the sand on the smallest amount of misinformation with the hope that central planning has once again regained control.
Reuters breaks down the second round of the "Chavez is shot" rumor:
The Arab League head Amr Moussa said on the Thursday the group would consider a proposal by Venezuelan President Hugo Chavez to negotiate a peace settlement for Libya's intensifying conflict.
Energy analysts consulted by Reuters said they saw little chance that any Chavez-backed plan would succeed.
"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."
"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."
"The violence and bomb strikes could hit export terminals, and might extend to upstream infrastructure and pipelines. I think that the risk of Libyan oil exports remaining affected for a long period are already being priced into oil."
OLIVIER JAKOB, Swiss-based research firm Petromatrix:
"Prices have weakened on the news, or the rumor, that Gaddafi could accept a proposal made by Chavez for mediation. Chavez' credibility does not fly very high; the only value of such a proposal is if it offers some honorable way out for the Gaddafi clan. The only value is if it offers a face-saving way out to exile."
CHRISTOPHE BARRET, analyst, Credit Agricole CIB, London:
"Whatever comes of it, the plan looks very vague and I don't think it will be seriously considered. An earlier press report indicated the Arab League 'accepted' the plan, but we now see that isn't the case."
"The possibility of very lengthy conflict in Libya has increased. What is most worrisome today is how close to the country's oil installations the violence has come. Exports from Libya could be wiped out."
CARSTEN FRITSCH, Analyst at Commerzbank in Frankfurt:
"There is probably no chance that rebels would be willing to sit down at a negotiating table with Gaddafi now. It's highly unlikely a Chavez peace proposal could work."
"Government forces are attacking the oil city of Brega, and this city is at the center of the conflict. According to state oil company NOC, Libya's oil infrastructure hasn't been damaged yet. But the risk of damage is increasing, and that could make it harder for Libya to resume oil supplies any time soon."
TIM RIDDELL, head of technical analysis at ANZ in Singapore:
"If it's coming out of Chavez, it might not have a great degree of substance. I don't think it has a lot of credence, but it just looks like it's causing some unwinding of the most recent speculative positions. The market was long oil and long gold."