Oil Prices Diverge on Iraq Tensions

Oil prices diverged Friday, with the U.S. WTI contract hitting a nine-month high on concerns about spreading sectarian conflict in Iraq that could cause disruptions in crude supplies.

U.S. benchmark West Texas Intermediate for July shot up 83 cents, or 0.8 percent, to finish at $107.26 a barrel on the New York Mercantile Exchange.  The July futures contract expired Friday at the highest closing price since September 18 last year.

Brent crude for delivery in August eased back from its nine-month high the previous day, shedding 25 cents to settle at $114.81 a barrel in London.

"Brent crude oil is seeing a moderate correction to its recent advance on profit taking ahead of the weekend, as Iraq gathers more than 50,000 troops for a campaign against the Islamist insurgents who seized control of much of northern Iraq last week," said Tim Evans of Citi Futures. 

U.S. President Barack Obama on Thursday announced that he was ready to send 300 advisers to Iraq and, if necessary, to take "targeted" and "precise" military action to counter radical Sunni fighters.

Oil prices have hovered near nine-month highs on the Iraq tensions.

"Predominant gains this week have derived from the ongoing siege of Iraq's largest oil refinery, Baiji," said Dorian Lucas, an analyst at energy consultancy Inenco.

"Thus far the gains in Brent crude are based around sentiment that oil supplies from OPEC's second-largest producer may be disrupted," he said, noting that the Baiji refinery affects only oil processed for domestic use.

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.

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