SINGAPORE Brent crude rose to a near nine-month high above $113 per barrel on Monday as Sunni insurgents advanced in Iraq, intensifying concerns over a potential disruption to oil exports from the second-largest OPEC producer.
The sudden eruption of violence in Iraq led to a sharp spike in prices last week, with both Brent and U.S. crude gaining over 4 percent - the most since July and December respectively. Prices rose more modestly on Friday as the market waited to see if the conflict would threaten oil refineries south of Baghdad.
"It looks like the country is headed to civil war, which will mean a higher risk premium built into oil prices," said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo.
"This may not mean a stop to Iraqi exports immediately, but it probably will affect Iraq's ability to increase its production rate," he said.
Brent crude for August delivery rose 61 cents to $113.07 a barrel by 0719 GMT. The July contract, which expired on Friday, settled 39 cents higher at $113.41 per barrel, the highest since Sept. 9.
U.S. oil climbed 37 cents to $107.28 per barrel. On Friday, it rose as high as $107.68 before settling up 38 cents at $106.91 per barrel, the highest level since Sept. 18.
EXPORTS SAFE FOR NOW
Sunni insurgents on Sunday seized a mainly ethnic Turkmen city in northwestern Iraq after heavy fighting, solidifying their grip on the north.
Yet for the moment the immediate threat to Iraq's oil supplies - most of which is hundreds of miles to the south of the fighting - remains limited, analysts and consultants say. Northern exports have run at a trickle for months, and few had expected a rapid recovery.
Should the militants advance south of the capital, analysts expect them to encounter much greater resistance, while Iraqi exports from the north are considered safe for the moment as the major Kirkuk oil hub is held by Kurdish forces.
President Barack Obama said on Friday he needed several days to determine how the United States would help Iraq deal with the Islamists' stunning advance. But he ruled out sending U.S. troops back into combat in Iraq, which U.S. troops departed in 2011 after a bloody, costly war.
In Libya, its western El Feel oilfield has resumed production after security guards ended a protest that lasted more than two months, oil ministry officials said, but many oilfields and ports remain blocked.
Production at El Feel will reach 80,000 barrels a day within 24 hours, an official said on Sunday.
The Organization of the Petroleum Exporting Countries (OPEC) will have to produce a million barrels per day (bpd) more oil on average in the second half of 2014 to balance the global market, which will see a steep seasonal spike in demand, the International Energy Agency (IEA) said.
The IEA said in its monthly report it had raised its estimate of the demand for OPEC crude oil in the second half of this year by 150,000 bpd from its forecast last month to an average of 30.9 million bpd.
"Alongside stronger seasonal demand, an elevated geopolitical risk premium could see oil markets trade in higher ranges," analysts at ANZ said in a note.
(Editing by Himani Sarkar, Muralikumar Anantharaman and Subhranshu Sahu)
Trending On Reuters
India's annual consumer price inflation edged up to a 17-month high of 5.69 percent in January, driven up by higher food costs, government data showed on Friday. Full Article