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Oil prices rise on US inventories, Iraq turmoil

Oil prices finished somewhat higher on Wednesday following an unexpectedly large decline in US crude supplies and worsening turmoil in Iraq.

NEW YORK: Oil prices finished somewhat higher on Wednesday following an unexpectedly large decline in US crude supplies and worsening turmoil in Iraq.

US benchmark West Texas Intermediate for July delivery edged higher by five cents to $104.40 a barrel on the New York Mercantile Exchange.

In London, European benchmark Brent oil for July delivery advanced 43 cents to $109.95 a barrel on the Intercontinental Exchange.

The gains followed a weekly oil-inventory report by the US Department of Energy which showed crude stocks fell 2.6 million barrels, more than the 1.7 million forecast by analysts surveyed by Dow Jones Newswire.

The report also showed a 200,000 barrel decline at a widely watched US oil-trading hub in Cushing, Oklahoma.

Analysts kept watch on oil producer Iraq, where militants that had claimed the city of Mosul on Monday seized the city of Tikrit on Tuesday in a lightning jihadist offensive that swept closer to Baghdad.

The assault by the Islamic State of Iraq and the Levant has driven some 500,000 people from their homes and spurred pledges from both the US and Iran for more aid to Iraq.

The oil market has so far not reacted strongly to the Iraq violence because "traders are probably saying this is far from the oil sector," said Michael Lynch, president of consultancy Strategic Energy & Economic Research.

But "there is potential for serious political instability in the country," Lynch added.

As expected, the Organisation of Petroleum Exporting Countries, which pumps out about one third of the world's oil, agreed to maintain its oil production ceiling at 30 million barrels per day.

Saudi Oil Minister Ali al-Naimi said he was "very happy" with the oil market. US oil prices have traded above $100 a barrel for most of the last two months.

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