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Oil prices hit new nine-month peaks on Iraq violence

Global oil prices rose to fresh nine-month highs on Friday as traders eyed escalating violence in Iraq, OPEC's second-biggest crude exporter.

NEW YORK: Global oil prices rose to fresh nine-month highs on Friday as traders eyed escalating violence in Iraq, OPEC's second-biggest crude exporter.

US benchmark West Texas Intermediate (WTI) for July rose 38 cents to close at $106.91 a barrel, its highest level since September 18, 2013.

Brent crude for July delivery climbed 39 cents to $113.41 a barrel in London trade, its highest close since September 9.

Prices had rallied sharply on Thursday, more than $2 for WTI and $3 for Brent, when Sunni militants pushed toward Baghdad and forces from Iraq's autonomous Kurdish region took control of the northern oil hub of Kirkuk.

"People are calmer today because they realise that the threat to oil supplies is not very strong," said Michael Lynch of Strategic Energy and Economic Research.

The militant offensive, spearheaded by the jihadist Islamic State of Iraq and the Levant, has taken a huge swathe of predominantly Sunni Arab territory in northern and north-central Iraq since its launch in Mosul late on Monday.

On Friday, they battled pro-government forces near Muqdadiyah, just 80 kilometres (50 miles) from Baghdad's city limits.

US President Barack Obama said he was examining options short of sending troops to help Iraq counter the Sunni militant onslaught.

"It's looking like a war here, and to the extent there is any credible threat to Baghdad, to the central government, and of course the southern Iraq oil, this is a major concern for the oil market," said John Kilduff of Again Capital. Kilduff said the market had not yet entirely priced the situation.

Iraq is the second-biggest oil exporter in the 12-nation Organisation of Petroleum Exporting Countries (OPEC) after kingpin Saudi Arabia.

The International Energy Agency said that oil supplies from Iraq may not be at immediate risk.

"Concerning as the latest events in Iraq may be, they might not for now, if the conflict does not spread further, put additional Iraqi oil supplies immediately at risk," the IEA said in its monthly market report on Friday.

It pointed out that Iraq's relatively small output from the north of the country has been off the market since March due to violence while output from the south has been on the rise and production has hit a 30-year high.

But the IEA pointed to the long-term importance of Iraq for the global energy market.

"Roughly 60 per cent of the growth in OPEC crude production capacity for the rest of this decade will come from Iraq," it said.

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