SINGAPORE: Brent crude held above $113 per barrel on Wednesday as heavy fighting in Iraq shut the country's biggest refinery and led to the withdrawal of staff by foreign oil firms, stoking worries about exports from the key oil producer.
Some oil companies are pulling foreign staff from Iraq, fearing Islamic militants from the north could strike at major oilfields concentrated in the south despite moves by the Baghdad government to tighten security.
"Exports haven't been affected yet, so the price gain we've seen so far is only on speculation that things might deteriorate further and instability will spread to the south of Iraq," said Ben Le Brun, a markets analyst at OptionsXpress in Sydney.
"But as soon as we hear about production affected, then we will start to see the price move up more dramatically.
But it's very hard to put a figure on this," said Le Brun. "In a worst case scenario, Brent could go above $120 at a minimum." Brent lost 35 cents to $113.10 a barrel by 0505 GMT, after settling 51 cents higher.
US crude gained 7 cents to $106.43 a barrel after it ended 54 cents lower.
The US July contract expires on Friday.
Worries about disruption to Iraq's supply drove up both benchmarks by more than 4 percent last week, the biggest weekly jump since July for Brent and since December for US crude.
Iraq's biggest oil refinery, Baiji, has been shut down and its foreign staff evacuated, although refinery officials said local staff remain in place and the military is in control of the facility.
Iraqi officials say the southern regions that produce some 90 percent of the country's oil are completely safe from the Islamic State of Iraq and the Levant (ISIL), which has seized much of the north in a week as Baghdad's forces there collapsed.
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