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Updated from 2:18 p.m. EDT

Crude oil prices closed lower again Thursday for their fifth decline in a row, as traders reacted to news of a cease-fire between Iraq's interim government and radical Shiite cleric Muqtada al-Sadr in Najaf, which reduces the chances of a disruption in supply from the major Persian Gulf producer.

The October futures contract lost 43 cents, or 1%, to $43.04 a barrel in floor trading on the New York Mercantile Exchange. A brief rally at midday failed to hold. Prices plunged almost 4% Wednesday.

Recent fighting between a combination of U.S. and Iraqi forces and the cleric's militia has been a major focus of the market, especially given the threat of sabotage attacks.

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In the past five sessions, the benchmark U.S. crude has dropped abut 13% from the record high of $49.40, set by the September futures contract last Friday, the day of its expiration.

Violence in Iraq and its potential to disrupt production and exports -- as it has on several occasions since the U.S.-led war and subsequent occupation -- has become a major factor in prices. Iraq's exports, which total about 1.78 million barrels a day, have yet to be fully restored after a recent spate of sabotage attacks.

Edgy traders have had no shortage of reasons to bid up oil recently, but many market watchers had predicted prices were due for a sizable and much-needed correction as they soared more than 20% in August alone in what appeared an inevitable march to $50 a barrel.

In Russia, uncertainty surrounded the outcome of the high-stakes tax battle between the government and Russian oil giant Yukos -- a tug-of-war drama that has sparked frequent concerns for its potential to slow exports -- after a court rejected the company's latest appeal Tuesday.

Crude oil prices had routinely hit record highs in the first three weeks of August, following a brief correction after their previous June high as OPEC increased its official production level by some 2.5 million barrels a day.