Oil prices fell sharply yesterday after a general strike in Nigeria was called off, removing concerns over possible supply disruption from the two million-barrels-per-day Opec producer.

Benchmark Brent crude oil in London was down 46 cents to $27.36 a barrel, while US light crude futures had dropped 43 cents to $29.70 a barrel, losing ground for the second consecutive day.

Nigeria's unions said yesterday they were calling off a general strike over petrol pump prices after reaching a deal with the government.

The leaders of the umbrella Nigeria Labour Congress (NLC) issued a statement, saying they were ending the strike after the government agreed to back down and reduce petrol prices from 40 naira to 34 naira per litre.

Crude oil exports in the world's eighth largest exporter had however remained unaffected by the week-long strike.

"In the short term the market is rather bearish," said Steve Turner, an analyst with Commerzbank Securities in London. "We believe the downtrend is likely to continue with the current high level of Opec production."

However, Opec production, only slightly exceeding in June its 25.4 million barrel per day self-imposed production ceiling, is partly compensating for a lack of Iraqi oil production, struggling to restart after the war, analysts said. Iraq's northern export pipeline from the Kirkurk oilfields to the Turkish Mediterranean port of Ceyhan was damaged by a new sabotage blast over the weekend, further dashing hopes of raising crude exports, crucial to funding rebuilding.

"There's no illusion that Iraqi production will be sporadic and volatile, so it was no real surprise," said Mr Turner.

Baghdad is planning to sell only eight million barrels of oil in July, all from its southern fields, at a rate of 260,000 barrels per day, well below its previous target for that period.

Iraq was selling more than two million barrels daily before the war from a production of about 2.7 million bpd.

Analysts said even though oil prices were on a downtrend, Opec was unlikely to change its production limits at its extraordinary meeting in Vienna on July 31, as prices still remained at the top end of Opec $22-$28 price band.