As the holder of the biggest crude reserves in Africa, Libya is embroiled in efforts to oust leader Muammar Gadhafi, who has held tightly to power for 42 years. The United Nations also voted to place a no-fly zone over the North African nation and demanded rebels and forces loyal to Gadhafi adhere to a cease fire.
"The no-fly zone resolution increases the risk premium," Hannes Loacker, an analyst with Raiffeisen Bank International AG in Vienna, told the news service. "Without it, Gadhafi would probably re-conquer all parts of the country and the oil business would become more stable sooner. With the resolution, oil production will face more substantial outages for a longer period."
Shortly after 1 p.m., Brent crude oil futures were down 1.11 percent, a dip of $1.27 to $113.63 per barrel.
One analyst said the vote to authorize a no-fly zone might ultimately prompt a confrontation.
It might "result in the UN having to take military action against Qaddafi and the prospect of that is not good for a peaceful resolution," Ben Westmore, a minerals and energy economist at National Australia Bank in Melbourne, told Bloomberg. "The prospect of supply tightening is keeping a floor under oil prices."
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