LONDON, June 28: Oil prices fell sharply on Monday as traders reacted with relief to news of the end of the US-led coalition's occupation of Iraq two days ahead of schedule. The price of benchmark Brent North Sea crude oil for delivery in August tumbled by $1.07 to $33.90 in London.

New York's reference light sweet crude August contract dropped $1.20 to $36.35 in early trading. Prices fell after the US coalition's civil administrator Paul Bremer handed over power in Baghdad to Prime Minister Iyad Allawi in a hastily convened ceremony two days earlier than expected.

"You could say that the early handover has (had) a negative impact on the market," said Prudential Bache broker Christopher Bellew. But he said the news had been offset somewhat by the kidnapping of a US soldier in Iraq.

Analysts said the early handover of power in Iraq had deprived insurgents of a set date to focus on. But they added that the restoration of Iraqi sovereignty in itself was unlikely to improve near-term prospects for Iraqi oil exports, which have been disrupted by repeated acts of sabotage on the country's oil installations.

"Insecurity of oil infrastructure is likely to increase through the transition period," said Catherine Hunter, analyst at the World Markets Research Centre in London.

"The likelihood of ongoing volatility of Iraqi supplies until at least end-2004 means that whilst a end-year target of three million barrels per day is attainable in terms of available resources and infrastructure, technical problems and sabotage in particular mean there will be problems sustaining this capacity over a period of time," she wrote in a research note.

Iraq's two key oil pipelines in the south were pumping oil to Iraqi sea terminals again on Saturday after engineers finished repairing the damage caused by a series of sabotage attacks, an industry source told AFP in Basra.

"Pipeline number two began pumping oil again and we have reached a level of 70,000 barrels per hour," an official at one of the offshore terminals in the north of the Gulf said.

On Monday, the first, smaller pipeline resumed pumping after engineers completed emergency repairs. But even as the second southern pipeline came back on line, a new pipeline to link Iraq's northern oilfields in Kirkuk with the Turkish Mediterranean terminal of Ceyhan was attacked with mortars on Saturday, delaying its commissioning, according to the US military and Iraqi police. -AFP