Tuesday, August 15 2006 11:10 Hrs (IST) - World Time -

New York: Oil prices fell as much as US$ 1.75 a barrel as a cease-fire began in Lebanon and investors responded to news that BP expects to maintain half of its production at a large oil field in Alaska despite a pipeline leak.

Light sweet crude for September delivery fell 82 cents to settle at US$ 73.53 a barrel in electronic trading on the New York Mercantile Exchange yesterday. September Brent at London's ICE Futures exchange slipped further to settle at US$ 74.30 a barrel, down US$ 1.33.

"News of the UN-negotiated cease-fire in the Middle East and the announcement by BP that the western segment of the Prudhoe Bay field will resume production has buoyed the market," said Paul J Harris, an analyst at Bank of Ireland Global Markets in Dublin.

Prices dipped as low as US$ 72.60 during trading before a mild turnaround.

The market had worried that the conflict might threaten world oil supplies if it spilled into other countries in the region, particularly Iran, OPEC's No 2 oil pre fighting started.

The other positive market development came late Friday when BP PLC announced it would keep one side of the Prudhoe Bay oil field open as it replaces corroded pipes, enabling it to funnel up to half its normal output. BP had previously said it would have to completely shut down the nation's largest oil field after discovering a leak nearly a week ago.