Oil prices continued to slide yesterday as the Lebanon peace deal entered its second day and US regulators gave BP clearance to continue deliveries from Prudhoe Bay oilfield.
Though supply fears eased, price falls were limited by expectations the downward trend could reverse as the deadline for Iranian compliance with a UN resolution over uranium enrichment looms and on continued US weather concerns.
The UN Security Council has given Iran until August 31 to halt enrichment and reprocessing or face sanctions.
In London yesterday Brent North Sea crude for September delivery was down 24 cents to $74.06 per barrel in electronic trading.
New York's main contract, light sweet crude for September, slid 14 cents to $73.34 per barrel before the official opening of the US market.
The market extended Monday's losses as the Middle East peace agreement held.
Analysts had been concerned that fighting in Lebanon could spread to other countries in the region, such as Iran, which produces a large proportion of the world's oil.
Despite the lull so far, analysts said they fear tension in the region is far from over.
"We are still not out of the woods on a number of key issues, of which the 'hurricane window' and the Iranian situation are top of the heap," said analysts at Man Energy.
"Even the recently established ceasefire in Lebanon is not as tidy as it appears on paper," they added.
Concerns were fuelled on Monday night as President Bush again linked the Iranian and Syrian governments with Hezbollah, setting the countries in the context of the global "war on terror".
"This posturing will bring the Iranian nuclear dispute into renewed focus as the August 22 deadline for response to the EU proposals draws near," said Paul Harris of the Bank of Ireland.
Attention is also focused on today's US inventories data, which is expected to show a decline in both crude oil and petrol stocks.
Man Energy is forecasting a drop in crude stocks of between one and two million barrels, and a fall of between 800,000 and 1.2 million barrels of both petrol and distillates, largely as a result reductions in supplies from Prudhoe Bay.
The US's largest oilfield suspended deliveries last week when BP found severe corrosion in the pipeline.
Sucden Research said the company is expecting to restore its full output from the field at the end of the month.