LONDON: Oil futures rose to $110 a barrel on Wednesday as violence in Iraq prompted worries about the supply outlook, while a fall in U.S. stockpiles of gasoline pointed to seasonally stronger demand.
Brent futures gained 48 cents to $110.00 a barrel by 0828 GMT, after shedding 0.4 percent in the previous session.
U.S. oil rose 35 cents to $104.70 a barrel. It hit an intraday high of $105.06 in the previous session, inching close to the peak for the year at $105.22, touched in early March.
Militants from an al Qaeda splinter group who seized Iraq's second biggest city of Mosul this week have advanced into the oil refinery town of Baiji, setting the court house and police station on fire, security sources said on Wednesday.
The United States said it would support a strong, coordinated response to the aggression.
Oil Minister Abdul Kareem Luaibi aimed to assure markets that any state of emergency would not impact oil exports.
Although the fighting is not close to oil producing areas, it has prompted fears that the situation there could deteriorate further and ultimately hit production.
"It warrants support of the oil price. We already have Libya out, Iran's exports are low, and there is no prospect of an immediate return for either of them," said Bjarne Schieldrop, analyst at SEB in Oslo.
Ports in Libya are still closed as protests have lowered exports, which were over 1 million barrels per day, close to zero.
Data from the American Petroleum Institute showed gasoline stocks fell by 441,000 barrels, compared with analysts' expectations in a Reuters poll for a 843,000-barrels gain.
Investors are waiting for data from the Energy Information Administration due on Wednesday which will likely show that U.S. commercial crude oil inventories likely fell.
"Seasonal trends mean that stocks could keep falling until August," Schieldrop said, referring to higher demand for gasoline for the summer driving season in the United States.
OPEC OUTCOME
Investors were awaiting the outcome of a meeting of producer group OPEC, where Iran put the oil exporters organisation on notice about its plans to raise output swiftly after any lifting of sanctions imposed over its nuclear programme.
Oil Minister Bijan Zanganeh saying they could increase oil exports by 500,000 bpd.
However analysts said that there were no signs that the sanctions would be lifted in the near future, keeping the supply picture relatively tight.
OPEC, which pumps more than a third of the world's oil, is meeting in Vienna to agree policy for the second half of the year. Ministers have said they will leave the output target of 30 million barrels per day (bpd) unchanged, and that the market is well-supplied.
Oil market supply and demand is in good order and OPEC is set to leave its oil output ceiling unchanged, Saudi Arabian Oil Minister Ali al-Naimi said immediately ahead of the group's meeting.
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