* Brent crude settles above $115, highest since Sept. 9
* U.S. to send military advisers to Iraq, offers air support
* Iraq's largest refinery under siege
* Iraq crude-producing region, exports not disrupted
(Adds analyst quote)
By Lorenzo Ligato
NEW YORK, June 19 Brent crude hit a nine-month
high of more than $115 a barrel on Thursday as the United States
said it would send military advisers to Iraq, raising concerns
about the escalating conflict.
Government forces continued to battle Sunni militants for
control of Iraq's biggest refinery as U.S. President Barack
Obama said the United States will send up to 300 military
advisers to Iraq to combat the extremist insurgency.
The Baiji refinery near Tikrit, 200 km (130 miles) north of
the Iraqi capital, remained under siege as troops loyal to the
Shi'ite-led government held off insurgents from the Islamic
State of Iraq and the Levant and its allies who stormed the
perimeter, threatening national energy supplies.
If the 300,000 barrels per day refinery stays closed,
Baghdad will need to import more oil products to meet its own
domestic consumption, further tightening oil markets.
Brent rose 80 cents to $115.06 a barrel to settle at
its highest since Sept. 9. It had reached a high of $115.71
earlier in the session.
The U.S. crude oil futures contract for July, which
expires on Friday, rose 46 cents to settle at $106.43. The price
is now pushing toward a key resistance area at $106.75,
according to Dwayne Pliska, a senior trading consultant at High
Ground in Chicago, Illinois.
The spread CL-LCO1=R between the two benchmarks widened to
close at $9.01 from a spread of $8.67 the previous session.
Obama said on Thursday the United States will send military
advisers to support Iraqi security forces and create joint
operation centers in Baghdad and northern Iraq.
The United States is prepared to make targeted air strikes,
Obama said, but said ground troops would not return to Iraq.
Brent climbed towards $116 during Obama's speech as the
market saw more buyers of call options than sellers, said
Citigroup energy analyst Ed Morse. He added that the market's
flurry around the time of the president's statement was a result
of "real fast money and hedge funds".
"Markets are reacting to tomorrow's conditions," Morse said.
However, fears over supply disruptions in Iraq might not be
enough to support Brent prices further.
"I think we really need to see a disruption in supply before
Brent can go higher," said Gene McGillian, an analyst at
Tradition Energy in Stamford, Connecticut.
While fighting between Sunni militants and government-led
forces continued north of Baghdad, the conflict had not yet
spread to the country's southern regions, where most of Iraq's
3.3 million bpd of oil production is processed.
Uncertainty over potential export disruptions from Iraq has
caused the spread between Brent and U.S. crude oil to widen,
causing a spike in gasoline and diesel prices. The NYMEX
contract for reformulated gasoline blendstock hit its highest
intraday since July.
"So far the impact on Brent has been much greater than on
WTI. You would expect it to be that way initially, but the two
benchmarks usually come together. Instead, WTI is continuing to
trade flat," said James Williams, an energy economist at WTRG
Economics in London, Arkansas. "That's rather unusual because
the market is behaving rather realistically. It's reacting to
fundamentals of supply and demand instead of threats."
After the Iraqi conflict is resolved, the spread between
Brent and WTI may fall to about $5 a barrel, said Richard
Ilczyszyn, chief market strategist and founder of iitrader.com
LLC in Chicago. "The Iraq situation is probably going to be a
short-term event in the scale of things," he said, adding that
rising U.S. supply would mute the impact of potential
disruptions in Iraq.
(Additional reporting by Christopher Johnson in London; Editing
by William Hardy, Diane Craft, Jessica Resnick-Ault, Peter
Galloway and James Dalgleish)