Oil stays steady as Iraq turmoil intensifies, though most crude exports seen safe for now

The price of oil finished marginally lower Monday as fears of widening instability in Iraq, a key energy producer, were tempered by views that its oil exports would not be affected for now.

Benchmark West Texas Intermediate crude for July delivery closed down one cent at US$106.90 a barrel on the New York Mercantile Exchange after having risen as high as US$107.54.

Brent crude, a benchmark for international oils, gained 48 cents to US$112.94 a barrel on the ICE Futures exchange in London.

The northern town of Tal Afar became the latest to fall to the militants, who have already captured a vast swath of territory including Iraq’s second-largest city, Mosul. The militants vow to march on Baghdad.

The capture of Mosul, a crucial gateway for Iraq’s crude, raised worries about whether the country can rebuild its energy infrastructure and boost production to meet global demand, but most of Iraq’s oil exports appeared to be beyond the militants’ reach.

“Oil production in the south of the country is still secure,” said analysts at Commerzbank in Frankfurt in a note to clients, pointing out that around 90 per cent of Iraq’s oil exports of 2.5 million barrels a day were shipped from there.

Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said in a note to clients that the market will keep a “risk premium” of $3 to $4 a barrel in the price of oil as it watches the situation in Iraq play out.

In other energy futures trading in New York, wholesale gasoline rose one cent to US$3.07 a U.S. gallon (3.79 litres), heating oil gained one cent to US$3 a gallon and natural gas added three cents to US$4.71 per 1,000 cubic feet.