Oil prices have fallen to their lowest levels for eight months after Iraq accepted a United Nations (UN) resolution to allow weapons inspectors to return to the country.

The threat of an attack on Iraq had bumped up oil prices because of fears that supplies would be disrupted.

But the Iraqi ambassador to the UN, Mohammed al-Douri, said on Wednesday that Iraq accepted the resolution "unconditionally".

Brent crude oil prices, the benchmark figure, slipped $1 to $22.72 a barrel on the news.

Riding high

Oil prices had risen as high as $31 per barrel in September as the threat of a US-led attack on Iraq caused concern over supplies.

Since then, prices had already fallen back as it became clear that overproduction by a number of major oil-producing states had bumped up stocks.

The Iraqi parliament originally rejected the UN ultimatum but said it was up to President Saddam Hussein to make the final decision.

Market watchers said the decision had removed some of the so-called 'war premium' from oil prices.

"Until the decision was announced, there was an element of uncertainty," said Lawrence Eagles at GNI research.

Short term reprieve?

UN inspections on disarmament were launched in 1991, when Iraq was expelled from Kuwait.

A US-led coalition led the move after the Gulf War.

However, inspectors withdrew in 1998 after a dispute over access to presidential palaces.

The Iraqi decision to now re-admit the inspectors met with some scepticism.

Many people still believe there will be a US-led war on Iraq, even if it now happens later rather than sooner.

Kevin Norrish, oil analyst at Barclays Capital, said the Iraqi decision "puts off the likelihood of war for several weeks at least, until early December I would have thought."