* Brent spikes over $113 on Iraq supply worries; US over
* Iraqi Kurds seize control of northern oil city Kirkuk
* Insurgents surround Iraq's largest refinery in Baiji
(Updates prices at settlement)
By Lorenzo Ligato
NEW YORK, June 12 Oil prices jumped to
nine-month highs on Thursday, as concerns mounted that
escalating violence in Iraq could disrupt oil supplies from the
second-largest OPEC producer.
Sunni Islamist militants, who took over Iraq's
second-biggest city Mosul earlier this week, extended their
advance south toward Baghdad and surrounded the country's
largest refinery in the northern town of Baiji on Thursday.
"The fear is that will cause a threat to Iraqi oil
exports," Christopher Bellew, a trader at Jefferies Bache, said.
"If this conflict knocked out Iraq as an exporter, that would
have significant impact on prices."
Brent futures gained $3.07 to settle at $113.02 a
barrel, the highest level since Sept. 9. U.S. oil gained
$2.13 to settle at $106.53 a barrel, also the highest close
since Sept. 18, according to Reuters data.
Gains in U.S. crude were partly capped by high domestic
production and lower reliance on imports from Iraq, analysts
said. In 2013, the United States imported 341,000 bpd from Iraq,
which represents less than 4 percent of the country's total
crude oil imports, according to U.S. government data.
The spread CL-LCO1=R between the two benchmarks widened to
close at $6.49 after narrowing over the last two weeks.
After an initially muted response, the oil markets gave way
to growing alarm, as the Sunni rebels appeared to make rapid
advances toward the Shi'ite-led government in Baghdad,
threatening the country's future as a unified state.
Concern that the Baghdad-controlled Iraqi army was
disintegrating and could no longer secure key oil facilities was
exacerbated when soldiers fled the northern oil city of Kirkuk,
leaving it in the hands of Kurdish forces.
Sunni insurgents overran Tikrit, threatening the
300,000-barrel per day Baiji refinery that supplies Baghdad. A
witness who lives nearby said the refinery was surrounded by
militants, but White House spokesman Jay Carney said it remained
in control of the Iraqi government.
Despite concerns over supply disruptions, the bulk of Iraq's
oil production and export facilities are in largely Shi'ite
areas in the south of the country, where al Qaeda-inspired
groups enjoy little sympathy. Those facilities, which ship about
2.6 million bpd, were "very, very safe", the country's Oil
Minister Abdul Kareem Luaibi said on Wednesday.
"The big fear is if they get south of Baghdad," said Gareth
Lewis-Davies, a strategist at BNP Paribas. "But there is no
immediate indication that this will happen."
The spike in oil prices had pushed up U.S. gasoline and
heating oil futures which is likely to impact domestic physical
fuel market as it is are priced against the futures.
RBOB gasoline futures were 2.76 percent or over 8
cents higher at $3.0834 a gallon while heating oil,
against which diesel and jet fuel are priced, were up 3.10
percent, or 9 cents higher at $2.9944 a gallon.
(Additional reporting By Sabina Zawadzki Lin Noueihed in London
and Keith Wallis in Singapore; Editing by Dale Hudson, Susan
Thomas, Marguerita Choy and Diane Craft)