* Foreign oil firms pull staff from Iraq
* Iraq's biggest refinery shut after fighting
* Iraqi government says southern oil infrastructure safe
* Coming Up: Fed policy meeting outcome; 1800 GMT
By Jacob Gronholt-Pedersen
SINGAPORE, June 18 Brent crude held above $113
per barrel on Wednesday as heavy fighting in Iraq shut the
country's biggest refinery and led to the withdrawal of staff by
foreign oil firms, stoking worries about exports from the key
Some oil companies are pulling foreign staff from Iraq,
fearing Islamic militants from the north could strike at major
oilfields concentrated in the south despite moves by the Baghdad
government to tighten security.
"Exports haven't been affected yet, so the price gain we've
seen so far is only on speculation that things might deteriorate
further and instability will spread to the south of Iraq," said
Ben Le Brun, a markets analyst at OptionsXpress in Sydney.
"But as soon as we hear about production affected, then we
will start to see the price move up more dramatically. But it's
very hard to put a figure on this," said Le Brun. "In a worst
case scenario, Brent could go above $120 at a minimum."
Brent lost 34 cents to $113.11 a barrel by 0401 GMT,
after settling 51 cents higher. U.S. crude gained 9 cents
to $106.45 a barrel after it ended 54 cents lower. The U.S. July
contract expires on Friday.
Worries about disruption to Iraq's supply drove up both
benchmarks by more than 4 percent last week, the biggest weekly
jump since July for Brent and since December for U.S. crude.
Iraqi officials say the southern regions that produce some
90 percent of the country's oil are completely safe from the
Islamic State of Iraq and the Levant (ISIL), which has seized
much of the north in a week as Baghdad's forces there collapsed.
IRAQ'S OIL OUTPUT TARGET AT RISK
But the International Energy Agency (IEA) said that Iraq's
target to hit 4 million barrels per day of oil output by the end
of the year looks increasingly at risk, just as demand is
picking up due to a stronger global economy.
"Within OPEC, Iraq remains the main source of most of the
expected capacity growth, but this expansion looks increasingly
at risk," Maria van der Hoeven, IEA's executive director, said.
U.S. crude was supported by data from industry group
American Petroleum Institute (API) showing crude stocks fell by
5.7 million barrels last week to 378.2 million, compared with
analysts' expectations for a drop of 650,000 barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by
255,000 barrels, API said. The U.S. Department of Energy's
Energy Information Administration (EIA) is due to release its
closely-watched data at 1430 GMT.
Iran and six world powers re-launched talks on Tuesday to
rescue prospects for a deal on Tehran's nuclear activity by a
Britain said on Tuesday it would re-open its embassy in Iran
"within months," after a hiatus of more than two and a half
years, a diplomatic breakthrough that underscores the West's
desire to secure Tehran's help in Iraq and elsewhere in the
Oil investors will also keep an eye on the outcome of the
Federal Reserve's policy meeting later in the day. The Fed is
widely expected to shave another $10 billion from its monthly
bond purchases, which have supported commodity prices by
injecting extra liquidity.
(Editing by Himani Sarkar)