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Oil market climbs on Iraq tensions

Engineers at the Naher al-Umran gas refinery, some 40 kms north of the southern city of Basra July 17, 2009. (AFP PHOTO/ESSAM AL-SUDANI)

LONDON: Oil prices rose Monday on continued violence in key crude producer Iraq, holding not far from last week's nine-month peaks, analysts said.

Brent crude for delivery in August added ten cents to $114.91 a barrel in London late morning deals compared with Friday's closing level.

U.S. benchmark West Texas Intermediate for August gained 22 cents to $107.05 per barrel.

"Brent crude opened today at fractionally below $115 per barrel," said Dorian Lucas, an analyst at British-based energy consultancy Inenco.

"Prices remain around the nine-month high average achieved in the back end of last week, supported by the continued violence and instability in Iraq."

Last Thursday, Brent oil soared to $115.71 a barrel -- the highest point since September 9, 2013.

New York prices jumped to $107.73 Friday, attaining a level last seen on September 19, 2013.

Iraqi security forces are struggling to hold their ground in the face of an insurgent onslaught that has seized major areas of five provinces, displaced hundreds of thousands of people and sparked fears that the country could be torn apart.

The militants, led by the jihadist Islamic State of Iraq and Greater Syria (ISIS), swept into the towns of Rawa and Ana in Anbar province, west of Baghdad, after taking the Al-Qaim border crossing with Syria.

US Secretary of State John Kerry was in Baghdad Monday to push for Iraqi unity and stability, as Sunni militants swept through western towns abandoned by security forces.

Flying in from Jordan on a visit which the State Department had sought to keep secret amid security concerns, Kerry met Prime Minister Nouri al-Maliki and was to hold talks with Iraqi leaders across the political and communal spectrum.

Kerry "will discuss US actions underway to assist Iraq as it confronts this threat from ISIS and urge Iraqi leaders to move forward as quickly as possible with its government formation process to forge a government," State Department spokeswoman Jen Psaki said ahead of the meetings.

Oil continues to win support from the crisis in OPEC's number two oil producing nation, but markets have now priced in potential supply disruption, traders say.

"We see oil retaining support from the violence in Iraq, but markets have already priced in a significant risk premium in the last few weeks," David Lennox, resource analyst with Fat Prophets in Sydney, told AFP.

In an interview with U.S. television network CBS that aired on Sunday, U.S. President Barack Obama warned that the militants who have surged through Iraq in a lightning offensive could destabilise other countries in the volatile Middle East.

The militants have captured swathes of the country's north but have yet to directly threaten the key oil-producing region in the south, the main source of exports.

"We see prices remaining relatively stable at current levels as long as the crisis does not spread to Iraq's south where most of its exports are coming from," added Lennox.

"The market has already been quite used to patchy output from the north where the fighting is currently going on, and it must also be noted that Iraq has been extremely volatile in terms of output for many years now."

The violence in Iraq has a direct bearing on global crude prices because the country is the second-biggest oil exporter in the 12-nation Organization of Petroleum Exporting Countries (OPEC) after Saudi Arabia.

Iraq has more than 11 percent of the world's proved resources and produces 3.4 million barrels a day.

 

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Summary

Oil prices rose Monday on continued violence in key crude producer Iraq, holding not far from last week's nine-month peaks, analysts said.

Last Thursday, Brent oil soared to $115.71 a barrel -- the highest point since September 9, 2013 .

The violence in Iraq has a direct bearing on global crude prices because the country is the second-biggest oil exporter in the 12-nation Organization of Petroleum Exporting Countries (OPEC) after Saudi Arabia.

Iraq has more than 11 percent of the world's proved resources and produces 3.4 million barrels a day.


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