SINGAPORE -- Oil prices hung round 11-week lows on Monday, kicking off what traders expect to be a decisive week for the united nations to settle a deadlock over a resolution to disarm Iraq, Reuters reported.

U.S. light crude fell five cents to $27.00 a barrel. It tumbled $1.40 or almost five percent last week and now stands at levels not seen since August 12.

A UN stalemate over the wording of a resolution ordering Iraq to allow weapons inspectors back on to its soil after a four-year break has reduced the imminent threat of a military strike against Baghdad, taking some of the steam out of prices.

Analysts said crude is fast losing a so-called war premium, which was estimated at one point at roughly $5 a barrel. Oil was pumped higher on fears that the use of force against Iraq might disrupt crude flows from the Middle East, which supplies about one-third of the world's oil.

"The market is now responding to fundamentals and the erosion of the war premium is well underway," Simon Games-Thomas, Head of Energy at NM Rothschild & Son in Sydney, said in a daily note. "Fair value for crude without war in Iraq is probably in the low $20s."

U.S. crude dropped $1.15 on Friday after consultancy Petrologistics forecast daily output by the OPEC producers' cartel would rise by more than half-a-million barrels in October, largely due to higher exports from Iraq.

The Geneva-based tanker-tracking consultancy said it expected OPEC to produce 26.78 million barrels per day this month, up from 26.26 million bpd in September as Iraqi oil sales rise to 2.55 million bpd from 2.095 million.

Sanctions-bound Iraq is excluded from OPEC's quota system.

The other 10 members of the Organization of the Petroleum Exporting Countries were seen pumping 24.23 million bpd, 2.53 million bpd over the official ceiling of 21.7 million bpd, Petrologistics said.

OPEC producers have been increasingly pumping above their quota limits to take advantage of strong oil prices with demand expected to pick up as the Northern Hemisphere winter sets in key week at UN.

The United States is expected to push for a vote this week at the UN Security Council on a draft resolution over Iraq that has backing from Britain, but opposition from France, China and Russia.

All five countries are permanent members of the UN Security Council and hold VETO rights.

A U.S. draft proposal would give UN arms inspectors far-reaching rights and privileges in ferreting out weapons of mass destruction, which Washington claims have been stockpiled by Iraqi leader Saddam Hussein.

The draft warns Baghdad of "Serious consequences" if it hampers weapons inspections, language that Russia and France fear can be interpreted as a trigger for military action.

French and Russian UN diplomats distributed on Friday rival draft resolutions in what envoys said was a negotiating stance to pressure the U.S. to revise its text.

An increasingly impatient President George W. Bush vowed on Sunday that the United States would lead a coalition to disarm Iraq if the Security Council failed to act against Baghdad.

Iraq denies Bush's claims that it has built up stocks of chemical and biological weapons and that it may even have nuclear capability.

Persian Gulf oil producers offered oil consumers some reassurance on Sunday, saying they would safeguard world supplies if there was any strike against Iraq.

Saudi Arabian Oil Minister Ali al-Naimi said he and his five colleagues from the Persian Gulf Cooperation Council (PGCC) pledged to "Protect worldwide supplies, guarantee market stability and preserve stable oil prices...at a fair level for producers and consumers" at a brief meeting in Muscat.

The PGCC comprises OPEC's Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, as well as non-OPEC Oman and Bahrain.