Oil prices dropped as much as $3 earlier today on the back of reports that a peace deal could be put into effect in Libya.

It has been confirmed that the Venezuelan president Hugo Chavez, an ally of Libya's Colonel Gadaffi, has proposed plans for an international peace mission composed of a bloc of 'friendly' countries who would help mediate a resolution for Libya's crisis.

Arab League Secretary General Amr Moussa claimed that the proposal was being considered by Gadaffi.

This initially had a positive effect on oil prices, which fell slightly earlier today when Brent was $113.9 per barrel.

However, they remain to fluctuate, with Brent at £115.39 as of 11.30 GMT.

Futures have fallen from a high of $119.79 last week to around $115 today in anticipation of a deal with Libya, which produces 2 per cent of the world's oil.