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Oil gains $1

Friday, August 08 09:35:05

Brent crude oil rose by more than $1 towards $107 on Friday after the United States approved air strikes against Islamist militants in Iraq, raising concerns over the security of oil supplies from OPEC's second largest producer.

President Barack Obama said he had authorized limited use of American air power on advancing Islamic State fighters in northern Iraq but had no intention of getting dragged into war there.

"The market will look very close at what happens next, and whether oil supplies from southern Iraq could be under threat," Tetsu Emori, a commodity fund manager at Astmax Co Ltd in Tokyo.

The bulk of Iraq's oil is produced in the south, removed from the fighting in the north. The Kurdistan Regional Government on Friday said its oil export pipeline to Turkey was operating normally at a rate of 120,000 barrels per day.

"Speculators may use this as an opportunity to enter the market, after the big correction we saw over recent weeks. But it seems the market is still oversupplied, and that should keep a cap on prices," he said.

Brent crude was up $1.11 to $106.55 a barrel by 0750 GMT, after trading as high as $106.85 a barrel earlier in the session.

U.S. crude rose 85 cents to $98.19 a barrel, after trading as high as $98.45 a barrel.

Brent's premium to U.S. crude hit $8.57 a barrel on Friday, the highest in more than six weeks.

Brent spiked above $115 in mid-June on fears that violence in Iraq would disrupt oil supplies from the OPEC member.

But prices fell back more than $10 over the past six weeks as it became clear that Iraqi oil continued to flow steadily from southern fields, over 500 miles (900 km)from the escalating violence in the north.

Global supply exceeded demand, building up a glut in the Atlantic Basin and Asian markets. (Reuters)

For more visit: www.businessworld.ie