Oil rises above $107 as Iraq turmoil intensifies
The price of oil finished down 1 cent 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.
The benchmark U.S. crude contract for July delivery closed at $106.90 on the New York Mercantile Exchange. Earlier Monday, it reached $107.54. Brent crude, a benchmark for international oils, gained 48 cents to $112.94 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.
Jim Ritterbusch, president of energy consultant Ritterbusch and Associates, said in a note to clients that the market will keep a "risk premium" of $3 to $4 a barrel in the price of oil as it watches the situation in Iraq play out.
Higher oil prices could mean U.S. drivers won’t see an expected decline at the pump ahead of the July 4th holiday. The average price for a gallon of gasoline in the U.S. on Monday was $3.66.
"The timing of the situation in Iraq could threaten the possibility that motorists see lower prices this summer, as we had anticipated in our much earlier forecasts," said Patrick DeHaan, senior petroleum analyst at GasBuddy.com.
In other energy futures trading in New York:
— Wholesale gasoline rose 1 cent to $3.07 a gallon.
— Natural gas added 3 cents to $4.71 per 1,000 cubic feet.
— Heating oil gained 1 cent to $3.00 a gallon.