LONDON, May 7: Oil prices slumped here on Tuesday as the market braced itself for the resumption of Iraqi oil exports after a month-long stoppage, a move that will ramp up world supply even as prices are already weakening.

Benchmark Brent North Sea crude for June delivery plunged 65 cents a barrel to $25.10 here by late trading. The market was shut on Monday for a public holiday.

In New York, the light sweet crude June contract extended Monday’s decline, dropping five cents to $26.12 a barrel.

The losses followed news that Iraq, which exports around two million barrels of oil a day under the UN-supervised oil-for-food programme, some 40 per cent of which ends up in the United States, was set to resume oil exports on Wednesday.

“Once they do actually start exporting then we’ll see a further drop in prices because of the basic lack of trust that a lot of the market has for Iraq,” said Ali Tahghighi, analyst at Barclays Capital.

An apparent easing of tensions in the Middle East was said to have undermined oil futures further.

Israeli Prime Minister Ariel Sharon was due to meet US President George W. Bush later on Tuesday to discuss his “peace plan,” which outlines incremental steps towards a settlement.

But the main focus for the London market, which was closed on Monday, was on Iraq. The oil producer, which sits on the world’s largest proven oil reserves after Saudi Arabia, halted exports on April 8 in protest at Israel’s military assault on the West Bank and US support for the Jewish state.

But the move had only a limited impact on world crude prices as other producers in the region, notably Opec kingpin Saudi Arabia as well as hawkish Iran and Libya, kept their taps open.

Gulf producers led by Riyadh argued that oil could no longer be used as a “weapon” in the Arab-Israeli conflict as happened in 1973.

With Iraqi exports set to flow once more, analysts believe there is little prospect that Opec, which slashed output last year in a bid to shore up a post-September 11 slump in prices, will sanction any production increase at its June 26 meeting.—AFP