Oil Prices Rally on Iraq Violence
Oil prices climbed on Thursday on rising concerns that turmoil in Iraq will disrupt Middle East supplies, analysts said.
U.S. benchmark West Texas Intermediate for delivery in July jumped $1.47 compared with Wednesday's close to $105.87 a barrel, also following a stockpiles report indicating solid U.S. demand.
Brent crude for July rallied $1.68 to stand at $111.63 a barrel in London afternoon deals, "reflecting investors' concerns over escalating (Iraq) violence, with potential emerging evidence of distribution further threat to supply", said Dorian Lucas, an analyst at energy consultancy Inenco.
Jihadists were pushing toward Baghdad on Thursday after capturing a town to the north, as the U.S. mulled air strikes in a bid to bolster Iraq's collapsing security forces.
With the militants closing in on the capital, forces from Iraq's autonomous Kurdish region took control of disputed northern oil hub of Kirkuk to protect it from jihadist attack, officials said.
Tang Hsin Jin, an analyst at traders CMC Markets, said there were fears that militants would "cause supply disruptions in the oil refinery town of Baiji".
The town, 130 miles (209 kilometres) north of Baghdad, is home to Iraq's biggest oil refinery.
Iraq is the second largest crude producer in the OPEC cartel after Saudi Arabia, pumping an average of about 3.5 million barrels a day according to the government.
It boasts the fifth largest proven crude oil reserves in the world.
OPEC meanwhile faces a period of well-supported oil prices as traders track supply-side uncertainties surrounding Iraq, Iran and Libya, as well as Ukraine, analysts said Thursday.
The oil exporters' cartel opted this week to maintain its crude output ceiling, expressing confidence in the market despite global tensions keeping prices high.
OPEC, which will convene again in late November to assess the state of the market, remains happy with Brent oil prices hovering close to $110, benefiting producers.
Singapore's United Overseas Bank meanwhile said that prices were well-supported after the official U.S. oil inventory report released Wednesday showed "a bigger than expected decline" in commercial crude stockpiles last week.
The drop of 2.6 million barrels outstripped analyst forecasts, indicating robust demand in the world's top crude consuming country.
Source: Agence France Presse
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