World oil prices plunged yesterday on signs the United States was ready to compromise over a UN resolution on Iraq, causing speculators to dump positions built up on fears of an imminent strike on Baghdad.

Dealers said any compromise resolution, which may not explicitly sanction the use of force, reduced the likelihood of a US attack and deflated a war premium that has already added 40 per cent to the price of oil since the start of the year.

Benchmark Brent crude oil slid $1.12 (€1.15) to $26.72 a barrel by early evening in London, equivalent to a 4 per cent fall, while US crude futures dropped $1.18 to $28.42.

"An attack appears not to be imminent at this stage, and I think there is room for prices to fall further," said Mr Nauman Barakat, a trader at FIMAT International Banque.

The threat of war in the Middle East and disruption to oil supplies has kept crude close to $30 a barrel since August.

United States Secretary of State Mr Colin Powell said Washington would introduce a compromise resolution to the United Nations Security Council this week, after its initial proposal was rejected. - (Reuters)