Oil Prices in Decline as Mideast Tensions Ease : Gulf crisis: Wholesale costs of unleaded gasoline and other refined petroleum products also plummet.

NEW YORK — Lessening tension in the Middle East pushed down oil prices by more than $4 per barrel today in a selloff that professional traders called the biggest one-day decline in recent memory.

Prices of wholesale unleaded gasoline and other refined petroleum products also plummeted in response to a sense that the threat of war has receded in the world’s most abundant oil region.

“It’s an easing of the tensions,” said Ann-Louise Hittle, a senior oil analyst with Shearson Lehman Bros. “A change in psychology, too.”

The energy market was influenced by a number of weekend developments, notably the U.N. Security Council’s sanction of force against Iraq and other diplomatic activity that suggested the Iraqis are feeling acute isolation after their seizure of Kuwait Aug. 2 and are willing to talk. An OPEC meeting in Vienna also led traders to bid down the price of oil.

“The Saudis and Venezuelans and United Arab Emirates are all expected to increase production,” said Peter Beutel, a trader with Merrill Lynch Energy Futures. “That could alleviate supply problems.”

Envoys from the Organization of Petroleum Exporting Countries were meeting in Vienna to discuss the shortfall of 4 million barrels a day caused by the international boycott of oil from Iraq and Iraqi-occupied Kuwait.

In midafternoon trading today on the New York Mercantile Exchange, the world’s largest market for petroleum, the October-delivery price of light sweet crude dropped $4.66 to $26.25 per barrel.

Crude had been trading above $30 a barrel since reaching that plateau Wednesday for the first time since November, 1985.

Unleaded gasoline plummeted 18.66 cents to 86 cents a gallon on September contracts, following last week’s rally that kept prices well above $1 a gallon. Home heating oil dropped 12.96 cents to 78 cents a gallon for September delivery.

The Merc doesn’t keep records of petroleum price ranges, but exchange aides said the one day drop in crude was the biggest they had seen.

October contracts for natural gas fell to $1.502 per 1,000 cubic feet from $1.525 on Friday.

Hittle said today’s downturn was accentuated by a British banking holiday, which prompted traders in London to make oil deals elsewhere.

Despite today’s sharp drop in oil prices, those following the industry cautioned that crude can move back up as easily as it moves down, depending on whatever news comes from the Middle East.

On the European spot market, where crude is bought and sold to the highest bidder, the United Arab Emirates’ Dubai light--the key OPEC crude from the Middle East shipped mainly to the Far East--was down $1.15 at midday to $28.45 a barrel.

Britain’s widely traded North Sea Brent fell 60 cents to $30.40 a barrel.

On the U.S. Gulf Coast spot market, prompt delivery WTI was off $1.30 a barrel to $26.55 a barrel.