Oil prices fell from their two-year highs on Tuesday, as pressure mounted against an immediate attack on Iraq, lessening fears of a possible disruption of oil supplies from the world's eighth-largest exporter.

US light crude futures fell 55 cents to $36.25 a barrel after settling 44 cents higher in New York on Friday. On Monday, European prices closed 58 cents lower to $31.92 a barrel.

"I don't think anyone is naive enough to think war clouds have gone away for good, but they are being held in check for a while at least," a London-based broker said.

European Union leaders united on Monday to warn Iraq that United Nations' arms inspections could not go on indefinitely without Baghdad's cooperation and declared for the first time that war could be the last resort.

But the 15 EU leaders, bitterly divided over the Iraq crisis, failed to agree on how much time Baghdad should be given to rid itself of suspected weapons of mass destruction.

The split prompted the United States and Britain to look at other ways to get the Security Council to support a new resolution on Iraq.

But no draft is expected to emerge before Wednesday, with both nations waiting for the end of a public debate by countries without seats on the 15-member Security Council.

That session, expected to turn into another forum against US war plans, begins on Tuesday afternoon and will spill into Wednesday.

Bad weather, strikes

Oil prices took some support from bad weather in the northeastern portion of the United States, the country's largest consumer of heating oil, and a strike by Nigerian oil workers.

A deadly blizzard barrelled into New England on Monday, closing most major airports between Washington and New York.

The storm raised hopes that heating oil usage would rise, traders said.

"We're hoping the inventory numbers will reflect an increase in heating oil demand," a New York-based broker said, referring to weekly US oil and oil products inventory data due to be released on Thursday.

Lending further support was a strike by senior Nigerian oil workers, which came into force on Monday and quickly won the backing of blue-collar workers but showed no immediate effect on export loadings.

The Department of Petroleum Resources (DPR) said its management staff had taken over the duties of PENGASSAN senior staff union members who monitor export loadings at the terminals and fuel imports at jetties.

PENGASSAN, a union for white-collar workers, declared the strike by its DPR branch last Saturday after the collapse of talks to resolve their grievances over pay and greater autonomy.

Nigeria exports around two million barrels per day of crude, with a third or more heading to the United States, which is yet to fully recover from the loss of Venezuelan supply due to a protracted strike there.