Oil prices soar to a new nine-month peak on Iraq violence

Oil prices soar to a new nine-month peak on Iraq violence
A worker walks in West Qurna oilfield in Iraq's southern province of Basra on March 29, 2014. - See more at: http://www.straitstimes.com/news/business/economy/story/oil-prices-soar-new-nine-month-peak-iraq-violence-20140619#sthash.MRuzkbO2.dpuf

LONDON - Oil prices soared Thursday to a new nine-month high point on escalating violence in Iraq, as militants attacked the major crude producer's biggest refinery and seized more territory.

Brent crude for August delivery rallied as high as US$114.80 per barrel, reaching a level last seen in September 2013. It later stood at US$114.50, up 24 cents from Wednesday's close.

US benchmark West Texas Intermediate for July delivery added 40 cents to US$106.37 a barrel.

"Brent crude has strengthened today, supported by the ongoing advance of the Islamist militant insurgency in Iraq," said Inenco analyst Dorian Lucas.

Iraqi forces regained full control on Thursday of the country's largest oil refinery after heavy fighting with Sunni militants attempting to seize it, officials said.

"The security forces are in full control of the Baiji refinery," Lieutenant General Qassem Atta, Prime Minister Nouri al-Maliki's security spokesman, said in televised remarks.

Top US officials warned Iraq's leader against "sectarian" policies as President Barack Obama weighed calls on Thursday for air strikes on Sunni insurgents bearing down on Baghdad.

The sharp criticism of Mr Maliki came as he scrambled to beat off a militant onslaught that has seen an entire province and parts of three others fall out of government control in an offensive that could threaten the country's very existence.

The swift advance of fighters led by the Islamic State of Iraq and the Levant (ISIL) has sparked international alarm and the United Nations has warned that the crisis was life-threatening for Iraq.

"The situation in Iraq will be watched closely by anxious investors and any material disruption could see (Brent) contracts extend above US$115 per barrel, a level last reached in early September last year," added Sucden analyst Kash Kamal in London.

Most of Iraq's oil infrastructure is in the far south of the country, which has so far not been affected by the now nine-day insurgency.

Baghdad has called for US air strikes as the lightning offensive rapidly bears down on the capital.

The crisis has rocked the global oil market because Iraq is the second-biggest producer within the 12-nation Organisation of Petroleum Exporting Countries (OPEC).

In the longer term - even if the southern oilfields remain unaffected - the security situation could scare off investors who are needed to pump sorely-needed capital into the Iraqi energy sector, analysts say.

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