Iraq violence sends oil prices towards $112 a barrel

Brent crude oil rose up towards $112 a barrel on Thursday on fears of the volatile situation in Iraq leading to disruption of oil supplies from the major OPEC exporter.

The Brent futures contract - an international benchmark sensitive to geopolitical turmoil was up $1.85 to $111.80 a barrel by 7:02 am ET, cutting earlier gains that saw it increase over $2 to its highest since early March.

US oil was up $1.50 to $105.90 a barrel, paring earlier gains that took the prices past a year high of over $106.

While the initial market response to the news that Iraq's second-largest city had been seized by militants, had been muted, the news of their rapid advance towards the country's largest refinery at Baiji had led to growing alarm.

Reuters quoted Christopher Bellew, a trader at Jefferies Bache as saying he would entirely ascribe this development to the insurrection in the north of Iraq.

He added the fear was that it would cause a threat to Iraqi oil exports.

He added if this conflict knocked out Iraq as an exporter, it would have significant impact on prices and how high they could go depended on what happened.

Meanwhile, Steven Mufson writes  in a blog in The Washington Post that the only oil-related casualty so far from the fighting had been the pipeline running from Kirkuk to Ceyhan in Turkey.

The pipeline, that had been out of commission since March due to sabotage, was expected to be repaired and start carrying up to 250,000 barrels a day.

According to Mufson, that might remain the only petroleum casualty. He added that Iraq's biggest oil fields were far to the south, closer to Basra than to Baghdad.

He added that Islamic State of Iraq and Syria (ISIS) forces were modest in size, and any attempt to reach the south might stretch their supply lines and put them up against tougher foes, the 2.5 million barrels a day exported via terminals and tankers in the Persian Gulf, therefor seemed relatively secure.