The officials, who declined to be identified by name, wouldn't estimate how many wells were involved.

Captain Adam Frame of Britain's 23 Engineers Regiment said such fires may be oil-slick defenses, man-made barriers around six plants that separate natural gas from crude oil, on the eastern side of Ramaila.

"That's going to make it very difficult to get to the wells," Frame said. "The issue is the six gas-oil separation plants."

Oil prices rebounded from an earlier decline on concern among traders the fires may have been set by the Iraqi regime, as an act of sabotage. The field's two sections may originally have held more than 20 billion barrels of reserves, or about a fifth of the nation's total.

Brent crude oil was up 1 cent at $26.76 a barrel as of 5:43 p.m. in London, after earlier losing as much as $1.25.

U.S. officials said they also had seen reports though wouldn't confirm that wells were ablaze.

"I have seen indications and reports from people that there may be, that the Iraqi regime may have set fire to as many as three or four of the oil wells in the South," U.S. Defense Secretary Donald Rumsfeld said when asked by reporters in Washington.

Disputed Area

Sky News reported earlier that two oil fields are on fire south and west of Basra in southern Iraq, citing the Pentagon.

"This field is an important component of Iraq's oil export stream to the south," said Manoucheher Takin, an analyst at the Center for Global Energy Studies in London. "Rumaila has north and south sections. The south part extends into Kuwait which was how the war started back in 1990, when Iraq said Kuwait was siphoning off oil from their field."

Ratqa is the name that Kuwait gives to its part of the contiguous Rumaila field that straddles the border.

Rumaila's northern section originally had the capacity to produce about 500,000 barrels a day, and the southern section 700,000 barrels a day, though they were among southern fields damaged by the 1990-91 Gulf War, so the capacities are less now, Takin said.

The Rumaila fields originally held more than 20 billion barrels of oil, he estimated, of which between 5 billion and 10 billion barrels have probably already been extracted.

"Its potential is huge," Takin said. "It would be terrible if Iraq put this on fire because this is part of the future of Iraq."