LONDON: Brent crude was up near $113 a barrel on Monday after a strong rally last week, as insurgents advanced in Iraq, intensifying concerns over a potential disruption to oil exports from the second-largest OPEC producer.
The eruption of violence in Iraq led to a spike in prices last week, with both Brent and U.S. crude gaining more than 4 percent - the most since July and December, respectively.
But the rally seemed to run out of steam on Monday as the market waited to see how far oil exports would be impacted.
"We've had the initial shock, now we need to see what sort of response there will be from the Iraqis and how successful they will be in containing this," said Ole Hansen, senior commodity strategist at Saxo Bank. "The rally now needs to be supported by real concerns about supply."
Brent crude for August delivery was up 25 cents to $112.71 a barrel by 1108 GMT, after touching an intraday high of $113.28.
The July contract, which expired on Friday, settled 39 cents higher at $113.41 per barrel, the highest settlement level since September 2013.
U.S. oil was up 16 cents to $107.07 a barrel, after reaching an intraday high of $107.54 in Asian trading. On Friday, it rose as high as $107.68 before settling up 38 cents at $106.91 per barrel.
Reflecting on Monday's more modest gains, oil futures brokers and analysts said it looked as if the move up last week had been overcooked.
"There seem to be some grounds for thinking that the government in Baghdad may be able to restrict the ISIS civil war," one said. "But while the Kirkuk-Ceyhan pipeline is out of action I don't think we will see prices fall much more."
"Brent should correct the lion's share of its latest price rise," Carsten Fritsch, an oil analyst at Commerzbank in Frankfurt, said in a note.
"Nonetheless, the threat of civil war ... does justify a risk premium given that the anticipated growth in Iraqi oil production may fail to materialise on account of the unstable security situation and an unwillingness to invest as a result."
EXPORTS SAFE FOR NOW
On Sunday insurgents seized a mainly ethnic Turkmen city in northwestern Iraq after heavy fighting, solidifying their grip on the north.
For the moment the immediate threat to Iraq's oil supplies - most of which are hundreds of miles south of the fighting - remains limited, analysts and consultants say. Northern exports have run at a trickle for months, and few had expected a rapid recovery.
Should the militants advance south of the capital, analysts expect them to encounter much greater resistance.
A third export cargo of piped oil from Iraqi Kurdistan is scheduled to depart Turkey's Mediterranean port of Ceyhan on June 22, and crude oil from Iraqi Kurdistan is flowing as normal.
On Friday President Barack Obama said he needed several days to determine how the United States would help Iraq deal with the Islamists' advance. But he ruled out sending U.S. troops back into combat in Iraq, which U.S. troops departed in 2011.
In Libya, the western El Feel oilfield has resumed production after security guards ended a protest that lasted more than two months, oil ministry officials said, but many oilfields and ports remain blocked.
Production at El Feel will reach 80,000 barrels a day within 24 hours, an official said on Sunday.
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