Brent crude rose to a nine-month high on Wednesday as investors worried about exports from Iraq, while U.S. crude dipped after government numbers showed domestic crude inventories fell much less than an industry group had reported.
Brent rose past $114 a barrel as Sunni militants opposing Baghdad's Shi'ite government battled their way into Iraq's largest refinery, raising the specter of supply disruptions from OPEC's second-largest producer.
U.S. crude fell below $106 for the first time in a week, after the Energy Information Administration (EIA) reported crude stocks declined 579,000 barrels to 386.5 million barrels in the week ending June 13. The drawdown was much less than the drawdown of 5.7 million barrels reported by the American Petroleum Institute, an industry group.
"The number of crude oil stockpiles was shocking: the EIA report and the API report are kind of a tale of two cities. The market was gearing up for a more supportive report," said Phil Flynn, an analyst at Price Futures Group in Chicago. "The market will now get back to focus on the situation in Iraq, and that's going to keep it well supported."
EIA also reported that crude stocks at the Cushing, Oklahoma, delivery hub rose by 247,000 barrels.
Brent rose 81 cents to settle at $114.26 a barrel, the highest level since Sept. 6. U.S. crude fell 39 cents to settle at $105.97 a barrel, the lowest since June 11.
The spread CL-LCO1=R between the two benchmarks widened to close at $8.67, compared to a spread of $7.58 the previous session.
Last week, both crude benchmarks rose more than 4 percent on worries about disruptions to Iraq's oil supply. The crisis deepened as Sunni militants renewed their attack on the refinery of Baiji north of Baghdad, the biggest source of fuel for domestic consumption in Iraq.
Iraqi officials have said that the major oilfields in the southern regions are safe. Still, oil companies have pulled foreign staff out of Iraq, fearing violence could spread south of Baghdad.
"Crude prices are reacting to the headlines on the attack on the Baiji refinery," said Olivier Jakob, analyst at Switzerland-based consultancy Petromatrix.
Concerns about Iraqi supply have been mitigated by the possibility that the Kurdish Regional Government region could boost exports.
"In the short term, that could boost oil output and exports from KRG, potentially doubling from 120,000 bpd (barrels per day) to 250,000 bpd in July," said Natixis oil markets analyst Abhishek Deshpande.
U.S. oil fell further and Brent pared gains after the Federal Reserve closed its policy meeting with a widely anticipated move, shaving another $10 billion from its monthly bond purchases, which have supported commodity prices.
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