The price of oil climbed above $107 a barrel but eased from earlier highs Monday as fears of widening instability in Iraq, a key energy producer, were tempered by views that its oil exports would not be affected for now.
By mid-afternoon in Europe, the benchmark U.S. crude contract for July delivery was up 17 cents to $107.08 in electronic trading on the New York Mercantile Exchange. Earlier Monday, it reached $107.54. On Friday, it added 38 cents, gaining 4.1 percent on the week.
Brent crude, a benchmark for international oils, was up 11 cents to $112.57 a barrel on the ICE Futures exchange in London.
The northern town of Tal Afar became the latest to fall to the militants, who have already captured a vast swath of territory including Iraq’s second-largest city, Mosul. The militants vow to march on Baghdad.
The capture of Mosul, a crucial gateway for Iraq’s crude, raised worries about whether the country can rebuild its energy infrastructure and boost production to meet global demand, but most of Iraq’s oil exports appeared to be beyond the militants’ reach.
“Oil production in the south of the country is still secure,” said analysts at Commerzbank in Frankfurt in a note to clients, pointing out that around 90 percent of Iraq’s oil exports of 2.5 million barrels a day were shipped from there.
“Nonetheless, the threat of civil war in OPEC’s second-most-important producer country does justify a risk premium given that the anticipated growth in Iraqi oil production may fail to materialize on account of the unstable security situation and an unwillingness to invest,” they added.
A U.S. aircraft carrier has moved into the Persian Gulf as President Barack Obama considers military options, though he has ruled out sending in American troops.
In Europe, Russia cut natural gas shipments to Ukraine due to a payment dispute. Ukraine is also a transit country for Russian energy oil to the rest of Europe, though the dispute was not seen as an immediate threat to supplies.
In other energy futures trading in New York:
- Wholesale gasoline rose 0.24 cent to $3.0258 a gallon.
- Natural gas added 1.6 cents to $4.755 per 1,000 cubic feet.
- Heating oil gained 0.37 cent to $2.9913 a gallon.