LONDON, Sept 12: Oil prices fell on Thursday despite a warning from US President George W. Bush who laid out the case for an attack on Baghdad, saying that “action is unavoidable” against Iraq if the UN does not send weapons inspectors into the country.

Reference Brent North Sea crude for October delivery dropped to $28.04 a barrel from $28.39 at the previous close.

In New York, the light sweet crude October contract lost 39 cents a barrel to $29.38 in early trading.

Traders had been anxiously awaiting the Bush speech for days, so much so however that many had bought crude in advance on expectation of a hard line and sold their holdings to lock in profits when the president spoke.

“After having had the rally of the last week it’s a bit of profit-taking on the expectation that perhaps nothing is going to happen immediately because there’ll be lots of discussion and persuading to try to get the UN on board ... as opposed to jumping in a few planes and bombing Iraq tomorrow,” said Standard Bank analyst William Buchanan.

Oil prices have shot up in recent weeks amid signs that the United States is preparing the ground for an invasion of Iraq.

Though an attack on Iraq in itself would not cause huge disruption to world oil supply, analysts say, the worry is that other Middle East producers such as Saudi Arabia might become embroiled in the conflict.

The market was also still trying to guess what decision the Organization of Petroleum Exporting Countries (Opec) might take when its members meet in Japan next week to discuss output at a formal meeting on Thursday.

Reports that Mexican Energy and Mines Minister Ernesto Martens said his country, a non-Opec producer, would maintain exports at 1.66 million bpd for the next three months because of adequate supply raised expectations that Opec members might follow suit, traders said.—AFP