Oil prices fell 4 per cent today on expectations that the US advance on Baghdad and capture of the international airport would herald a swift return of Iraqi exports.
Oil has lost 25 per cent of its value in the last month as Western military advances in Iraq brought closer the prospect of extra supply to ease thin stocks in the West.
Benchmark Brent crude oil dropped 96 cents to $24.54 per barrel by early afternoon in London, while US crude futures fell 91 cents to $28.06.
"Every thrust forward suggests an end to the conflict is closer which means a return for Iraqi crude, and that is bearish for prices," a Commerzbank Securities analyst said.
Moreover, US oil company Chevron-Texaco said it was gradually restarting Nigerian production on Friday that it was forced to close down 12 days before because of ethnic clashes in the delta region.
Nigeria had shut about 40 per cent of its output because of the political violence ahead of elections later this month.
The surprise Nigerian stoppage had fueled concern about world oil supplies after Iraq, the world's seventh-largest exporter, stopped selling oil in the week leading up to the first US attacks on March 20th.
Analysts expect Iraqi exports to resume within three months, and any delays in this timetable could still drive prices higher.