Crude oil rises to near US$107 a barrel as Iraq fighting stokes supply concerns

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The price of oil rose to near US$107 a barrel Friday as Iraq’s widening insurgency fuelled concerns that crude supplies from OPEC’s No. 2 producer could be slowed.

After jumping more than $2 on Thursday, the benchmark West Texas Intermediate crude for July delivery rose 38 cents to close at US$106.91 Friday on the New York Mercantile Exchange. For the week, the U.S. benchmarkrude was up 4.1 per cent.

Brent crude, a benchmark for international oils used by many U.S. refineries, gained 39 cents to close at US$113.41 a barrel in London. Brent was up 4.4 per cent on the week.

Oil prices have risen to 10-month highs after an al-Qaida inspired group capturing two key Iraqi cities this week, including Mosul, which is in an area that is a key gateway for the country’s crude. The group has vowed to march on Baghdad.

The violence in Iraq is mostly centred in the country’s north, away from the major oil-producing regions of the south. The turmoil hasn’t yet slowed exports, though it raises concerns about whether Iraq can continue rebuilding its oil infrastructure and boost output to meet global demand.

“Without the oil production from the south of Iraq, the market would be stripped of an estimated 2.5 million barrels per day,” said a report from analysts at Commerzbank in Frankfurt. “The sharp price rise in the last two days shows that this oil supply is no longer viewed as secure, either.”

Iraq’s oil production has risen by about a fifth since 2011 to 3.3 million barrels a day, making it the second-biggest producer in the Organization of Petroleum Exporting Countries behind Saudi Arabia.

In other energy futures trading on the Nymex, wholesale gasoline fell 2.6 cents to close at US$3.058 a U.S. gallon (3.79 litres), heating oil fell 0.1 of a cent to close at US$2.988 a gallon and natural gas fell 2.3 cents to close at US$4.739 per 1,000 cubic feet.

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