The United States halted a big military buildup in the Gulf on Sunday after accepting an unconditional Iraqi offer to resume UN weapons inspections.

Brent crude for January delivery was trading 22 cents off at$12.10 a barrel at 11.20 GMT. US light crude for December delivery was down 35 cents at $13.23 a barrel in after-hours trade on the New York Mercantile Exchange.

"The market has given up the increases in price from early last week when the crisis was intensifying," John Russel, managing director of Bangkok-based Petroleum Economics Ltd.

Traders noted Washington remained ready to strike Iraq if Baghdad failed to keep its word and allow unhindered access for arms inspections dismantling Iraqi weapons of mass destruction.

UN secretary general Kofi Annan said that there was no guarantee there would be time for diplomacy if Iraq once again defied U.N. resolutions onthe work of the inspectors.

"The US has the mandate from the UN, so the markets could be surprised by an attack without warning if things go wrong again," said brokers GNI in London.

Annan said complete compliance was the best way for Iraq to achieve a lifting of global sanctions that have been in place since its invasion of Kuwait in 1990.

Oil experts monitoring Iraq crude exports for the United Nations as part of an oil-for-food programme remained in place in Iraq during the latest crisis and loadings went ahead virtually uninterrupted, shipping sources said.

A total of 1.8 million barrels from Turkey's Mediterranean Port of Ceyhan and 3.4 million barrels from Mina al-Bakr in the Gulf loaded in the last two days and more loading is now in progress.

But the threat of US air strikes stopped some oil loading as scheduled, the sources said. Bulgaria's Rosbulneft loaded only 400,000 barrels instead of its scheduled 1.9 million barrels, citing safety concerns for its decision.

James Brown, Asia energyanalyst at Merrill Lynch, said while the latest crisis was over, it did not ensure there would not be another in the future given Iraq's history of disrupting the weapons inspection programme.

"I am not convinced that this present conflict is over. It leaves the oil market on edge until such a time as this whole question is resolved."

The price slide brings into the spotlight once again high global oil stocks and efforts by the Organisation of the Petroleum Exporting Countries (OPEC) to bolster oil prices, which are more than $6 lower than year ago levels.

OPEC meets in Vienna next week to weigh up whether to cut output further or to try to enforce greater compliance with the existing cuts and extend their duration.

Russel, forecasting a global stock build in 1999 of 900,000 bpd following an estimated 1.5 million bpd build in 1998, said OPEC must cut output again or risk single digit priced oil in 1999.

GNI in London commented: "OPEC really ought to show the market something new at this month'smeeting to try to provide some confidence."