Crude oil futures fell sharply Tuesday on news that Iraq had resumed full exports a day after violence in the south threatened the country's oil exports.

On the New York Mercantile Exchange, oil futures for September delivery settled at US$44.52 a barrel, down 32 cents. Meanwhile, September contracts of Brent crude fell 28 cents to settle at US$41.28 a barrel at the London's International Petroleum Exchange.

Iraq's South Oil Co resumed pumping oil to two key southern export terminals after reaching a deal with the Shiite militia that had threatened to blow up the pipelines unless the company stopped production. The news allayed market's concerns about the potential loss of oil supplies from the Middle East and Russia.

However, some analysts said the sharp drop in oil prices might turn out to be no more than a short-term correction. With Organization of Petroleum Exporting Countries (OPEC) seen as increasingly powerless to influence oil prices because of its limited production capacity, traders continued to build into prices any potential threat to supplies.