NEW YORK (CNN/Money) - Crude oil prices fell Tuesday, as traders gained confidence that any shortages caused by an Iraqi embargo and Venezuelan labor unrest would be filled by other major producers, and as Israeli forces withdrew from two West Bank towns.

Oil prices spiked above $27 a barrel Monday after Iraq said it was freezing most of its oil exports for 30 days or until Israel ended its military offensive in the West Bank. Also driving prices higher was a freeze in shipments from Venezuela, the world's No. 4 oil exporter, caused by a labor strike.

But prices fell Tuesday, with light sweet crude futures dropping 72 cents to $25.82 a barrel in New York trade. Brent crude futures fell 72 cents to $25.63 a barrel in London trade.

Though United Nations observers reaffirmed Tuesday that Iraq had stopped shipping oil, traders were reassured by reports that Oil Minister Ali al-Naimi of Saudi Arabia, easily the world's largest oil exporter, said the kingdom would make sure there was enough oil to meet global demand.

"I believe there is no threat to the reliability of worldwide oil supplies, and the reliability of Saudi Arabian supplies in particular," al-Naimi reportedly said.

His comments echoed those of the Organization of the Petroleum Exporting Countries (OPEC), which told CNNfn Tuesday that it saw "no reason and no urgency" to raise its output levels, saying there was plenty of crude in the market.

"The market has really built in a higher price, being concerned about the possibility of supply disruptions, but the Saudis said they had a plan to make that up," said Kate Warne, oil and energy analyst at Edward Jones. "The market is warily eyeing what's going on, and at the moment it's saying there's enough excess capacity, so supply is not a major issue in the short term. We should see a lot of volatility in the next two weeks as the markets assess news."

OPEC, which accounts for 40 percent of the world's oil output and sits on more than three-quarters of the world's proven oil reserves, said Monday that it would not support Iraq's embargo, and most analysts doubt any other countries will join Iraq.

Iraq is an OPEC member and was the No. 7 global oil exporter in 2000, the latest year for which data are available. It sent nearly a million barrels of oil per day to the United States in January, making it the fifth-largest U.S. importer that month.

President Bush and members of his cabinet, including Energy Secretary Spencer Abraham and Interior Secretary Gail Norton, took advantage of the Iraqi embargo to trumpet a pet cause -- drilling for oil in the Arctic National Wildlife Refuge in Alaska as a way to lessen America's dependence on overseas oil.

"You know my opinion about Saddam ... the world's not going to follow him," Bush said, according to Reuters. "But it just goes to show how important it is to diversify our supply away from places like Iraq."

Iraq -- which said Tuesday it was still exporting oil to its neighbors Turkey, Syria and Jordan -- has used its oil as a weapon in the past, but analysts pointed out that it has never been an effective measure for the country. Its exports are limited by a U.N. resolution that allows it to export oil only in exchange for humanitarian relief.

The U.N. agency overseeing the oil-for-food program in Iraq estimates the suspension of oil exports for 30 days will reduce the total revenue by some $1.3 billion in the current phase of the program.

Arab nations tried the embargo tactic in 1973, triggering a surge in oil prices and a global recession. But Saudi Arabia and other OPEC members pledged in 2000 not to use oil as a political weapon. Many Persian Gulf states depend on oil revenue for more than two-thirds of government income and cannot afford to disrupt sales.

In the campaign that has drawn the ire of Iraq and other Arab nations, Israeli forces withdrew from the West Bank towns of Qalqilya and Tulkarem on Tuesday, raising hopes that Israel was beginning to respond to President Bush's call for a withdrawal "without delay." But it also began a new campaign in the town of Dura.

Israel began its campaign in the West Bank on March 29, following a wave of Palestinian suicide bombings during the Passover holiday.

Traders were also downplaying the importance of a work disruption in Venezuela. Employees of the state-owned oil firm, Petroleos de Venezuela (PDVSA), stopped working to protest Venezuelan President Hugo Chavez's efforts to gain more power over the company.

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Striking workers claimed to have stopped Venezuelan oil exports completely, while the government said there was no disruption. While it seemed likely that some disruption had occurred -- an ominous development, since Venezuela is one of the biggest sources of crude oil exports to the United States and the world -- many analysts doubted it would make much difference in the long run.

"It won't be a dramatic thing. Within a week, it should be resolved," said Michael Pineles, Latin American market strategist at IDEAglobal. "This is not like the United States -- there are no general civil rights. Right now, Chavez will get his way."

But Chavez's grip may weaken in the months ahead, and the strike, while temporarily disruptive, could mean lower oil prices in the longer run, pointed out First Albany oil analyst Mark Gilman.

"Chavez is a hawk on oil prices and always has been," Gilman said. "His hold on power is getting increasingly tenuous. This is very negative for intermediate oil prices -- OPEC could lose its principal hawk."