LONDON, July 24: Oil prices retreated further on Monday as prospects rose for a ceasefire between Israel and Hezbollah militants in Lebanon, dealers said.

Concerns that the violence could have spread to major crude-producing nations in the Middle East saw oil prices soar to all-time highs above $78 earlier this month.

On Monday, New York's main contract, light sweet crude for delivery in September, lost 18 cents to $74.25 per barrel in pit trading.

In London, Brent North Sea crude for September delivery fell 25 cents to $73.70 per barrel in electronic trading.

US Secretary of State Condoleezza Rice arrived in Beirut on Monday, calling for an urgent ceasefire in the Lebanon conflict even as Israeli troops were locked in combat with Hezbollah.

Israeli leaders, while warning the offensive could last for some time, have suggested they would accept some form of international peacekeeping force in southern Lebanon.

“An international peacekeeping force should be seen as a step in the right direction, and if it were to happen, it would probably pull prices down again,” said Investec analyst Bruce Evers.

“The Americans are refusing to condemn the Israeli actions, but there is a growing chorus of criticism from the international community, and the market is hoping that these criticisms will actually lead to a ceasefire.” However, he warned that the “the big concern is that Syria and Iran get pulled into the whole thing.”

Washington has come under increasing pressure for bold action amid criticism it is stalling to allow Israel time to attempt to wipe out Hezbollah, which set off the conflict after seizing two Israeli soldiers on July 12.

London Brent struck a historic peak $78.18 per barrel on July 17, while light sweet crude hit a record pinnacle of $78.40 in New York on July 14.Oil prices could climb higher in the third quarter of 2006, the Centre for Global Energy Studies said in a monthly report published on Monday.

“The CGES expects oil prices to remain firm or even strengthen this quarter,” the influential research body said.

Since striking the highs, crude futures have fallen in London and New York by around six per cent. However, current crude prices remain some 20 per cent higher than at the start of 2006.—AFP