Crude prices today extended the previous day's rally to sit at nine-month highs after militants closed in on Iraq's capital Baghdad, fuelling fears over supplies from the major crude producer. US benchmark, West Texas Intermediate, advanced 73 cents to USD 107.26 in late-morning trade after surging USD 2.13 in New York yesterday to reach its highest level since September.
Brent North Sea crude gained 57 cents to USD 113.59 per barrel after shooting up USD 3.07 in London. Iraq is the second biggest producer in the OPEC oil cartel after Saudi Arabia and any escalation of the violence there could hit supplies, sending prices higher, analysts said.
"Any disruption at OPEC's second largest producer risks tearing apart the global rebound we had seen this year," Desmond Chua, market analyst at CMC Markets in Singapore, said in a note. Phillip Futures warned that "higher energy prices will apply brakes on a global recovery and may even cause the world to re-enter recession".
US President Barack Obama has said his national security team "is looking at all the options" to help the Iraqi government. Iraq, which has the world's fifth largest proven reserves, pumps an average of about 3.5 million barrels of oil a day.
On Wednesday, the Organization of Petroleum Exporting Countries, meeting in Vienna, maintained its output ceiling where it has been since late 2011. Saudi Oil Minister Ali al-Naimi expressed satisfaction with a relatively stable oil market.