Oil fell almost $2 a barrel to below $73 this evening as a truce took effect to end fighting between Israel and Hizbollah, easing concern about supply from a region that pumps a third of the world's oil.
Prices also slipped as BP said it would keep half its Prudhoe Bay oilfield, the largest in North America, pumping while it carries out pipeline repairs instead of shutting down the entire field.
US crude was down $1.55 a barrel at $72.80 after dropping to $72.60, the lowest since July 20. London Brent lost $1.71 to trade at $73.92.
Oil traders fear that a prolonged war in Lebanon could draw in regional producers such as Syria or Iran, both supporters of Hizbollah.
Brent has dropped from a record high of $78.65 hit last week and prices may have further to fall for now, dealers said.
