Oil rose above US$107 a barrel Friday as Iraq's widening insurgency raised the risk that plans to expand oil output from the No. 2 OPEC producer could be derailed.
Oil prices have risen to 10-month highs after an al-Qaida-inspired group vowed to march on Baghdad after capturing two key Iraqi cities this week, including Mosul, which is in an area that is a key gateway for the country's crude.
The violence in Iraq is mostly centred in the country's north, away from the major oil-producing regions of the south. The turmoil hasn't had a big effect on oil exports though it raises concerns about whether Iraq can continue rebuilding its oil infrastructure and boost output to meet global demand.
"The possibility of present supplies being disrupted is a low possibility at the moment. What's more likely is that future production is not going to go up in the near term," said Ryan Huang, market strategist at IG Markets in Singapore.
Iraq's oil production has risen by about a fifth since 2011 to 3.3 million barrels per day, making it the second biggest producer in OPEC.
After rising as high as $107.68, the benchmark U.S. oil contract for July delivery was up 46 cents to $106.99 a barrel in electronic trading on the New York Mercantile Exchange by 1:55 a.m. ET Friday. On Thursday, the contract jumped $2.13, or 2 per cent, to $106.53.
Brent crude, a benchmark for international oils, was up 70 cents to $113.12 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
â€” Wholesale gasoline fell 0.7 cent to $3.091 a gallon.
â€” Natural gas fell 1.6 cents to $4.746 per 1,000 cubic feet.
â€” Heating oil added 1.4 cents to $3.00 a gallon.
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