* U.S. considers air strikes in Iraq
* Iraqi oil exports remain unaffected as govt tightens
* Iran, world powers to meet in Vienna for nuclear talks
By Jacob Gronholt-Pedersen
SINGAPORE, June 17 Brent crude futures held near
$113 per barrel on Tuesday with the United States considering
air strikes in Iraq as the security situation worsens in the key
oil producing country.
Islamic militants have routed Baghdad's army and seized the
north of the country in the past week, threatening to dismember
Iraq, although 3.3 million barrels per day of oil exports remain
President Barack Obama met with top national security
advisors on Monday to consider options for military action to
support Iraq's besieged government.
"The situation is very difficult to evaluate, and for now
the market is more let by psychological factors rather than any
actual supply disruptions," said Tetsu Emori, a commodity fund
manager at Astmax Investment.
Brent crude for August delivery had fallen 30 cents
to $112.64 a barrel by 0320 GMT. The contract settled 48 cents
higher on Monday, after touching an intraday high of $113.28.
U.S. July crude was down 25 cents at $106.65 a
barrel, after closing 1 cent lower. The U.S. July contract
expires on June 20.
Oil prices rose around 4 percent last week, the most since
July last year, but have since lost some steam as the Iraqi
government tightened security around oil infrastructure and
"The government is carefully protecting the oil
infrastructure, and for the time being we probably won't see any
disruptions to supply," said Emori.
"But should it come to air strikes, I think we can see oil
prices jump as much as $5 a barrel."
HUGE CHALLENGES IN IRAN TALKS
Further complicating the situation in Iraq, the Kurdistan
Regional Government, whose position has strengthened in the
north of the country, believes its share of total Iraqi oil
sales should be as high as 25 percent, up from a current 17
percent, an official spokesman said.
U.S. and Iranian officials discussed the Iraq crisis
although both ruled out military cooperation. The discussions
were held on the sidelines of a meeting starting on Tuesday in
Vienna as Iran and six world powers will try to narrow
differences and end a decade-old nuclear dispute.
With time running short if a risky extension of the nuclear
talks is to be avoided, negotiators face huge challenges to
bridge gaps in positions over the future scope of Iran's nuclear
programme in just five weeks.
A successful outcome could see additional Iranian crude
exported to global markets.
Meanwhile, Russian natural gas exporter Gazprom
reduced supplies to Ukraine on Monday after Kiev failed to meet
a deadline to pay off its gas debts.
A dispute over price could disrupt gas supplies to the rest
of Europe, potentially increasing demand for alternative fuels
such as oil.
(Reporting by Jacob Gronholt-Pedersen; Editing by Joseph