NEW YORK, April 5: Oil prices fell on Friday as US forces captured Baghdad’s main airport in their advance toward the capital, raising expectations of a swift end to the war in Iraq.

Also weighing on prices was the return of some oil production in Nigeria as ethnic strife abated, along with fresh signs of US economic weakness that may in turn sap fuel demand growth.

US crude futures fell 35 cents to $28.62 while Brent crude oil dropped 82 cents to $24.68 per barrel in London.

Since hitting prewar highs near $40 a barrel, oil prices have fallen some 25 per cent in the past month as Middle East oil flows suffered less disruption due to the war than earlier feared.

Every thrust forward suggests an end to the conflict is closer, which means a return for Iraqi crude, and that is bearish for prices, said David Thomas, an analyst at Commerzbank Securities.

US troops seized Baghdad’s international airport on Friday, seen as their biggest victory of the war to oust Iraqi President Saddam Hussein, drawing a bitter Iraqi threat to hit back with “non-conventional” means.

Shortly after the threat, Saddam gave a televised address which appeared to be the first clear evidence he had survived a US bombing raid on the first night of the war aimed at killing him and his two sons.

Expectations from the US and British military are that the restoration of Iraqi exports from southern oilfields will take at least three months.

Most of the fields, which pump about 60 per cent of Iraq’s oil, are already under control of those troops, but the northern oilfields near Kirkuk are still in Iraqi hands.

Also weighing on prices was news from Nigeria that oil majors ChevronTexaco and Royal Dutch/Shell are gradually restarting production they were forced to shut down 12 days ago because of ethnic clashes.

Nigeria has seen its output slashed by 40 per cent due to unrest in the oil-rich delta region ahead of elections later in April. Nigeria’s oil is particularly important to US refiners in summer as it is good for making gasoline.

The Opec producer cartel has eased supply concerns by pumping 8 per cent more than its self-imposed supply ceiling in March, a Reuters survey showed.

Key US ally Saudi Arabia, home to the world’s biggest oil reserves and output capacity, pumped at its highest level in 21 years. Analysts say that the recent price falls may soon encourage Opec to reverse some production increases.

Gloomy economic news also hit prices. US payrolls dropped by a worse-than-expected 108,000 in March, the government said on Friday.

Data this week showing a pull-back in the vast services sector, contraction in manufacturing and a hefty drop in factory orders has already revealed a bleak picture of the US economy.

Macro-economic measurements coming from both the US and Europe cannot be encouraging, said Mike Fitzpatrick, analyst with Fimat USA bank.

Asian economies are feeling the effects of the deadly flu-like SARS virus, with finance ministers and private economists warning of slower growth in the months ahead as the health scare hits retail and tourism sectors.—Reuters