By William L. Watts and Barbara Kollmeyer
NEW YORK â€” Crude-oil prices edged higher on Wednesday, with the U.S. benchmark pushing back toward $107 a barrel after militants in Iraq attacked the country’s biggest oil refinery, underlining worries about potential threats to export facilities in the south.
Nymex WTI crude oil for July delivery CLN4 +0.23% picked up 34 cents, or 0.4%, to $106.73 a barrel, partly recovering from a 54-cent loss on Tuesday. WTI crude is also taking a cue from expectations for tighter domestic supplies in the U.S.
The European benchmark, Brent oil for August delivery, which is the most sensitive to developments in Iraq, rose 18 cents, or 0.2%, to $113.63 a barrel. Nymex crude last week topped $107 a barrel as the conflict in Iraq heated up, while Brent had briefly topped $114.
The refinery, located in the northern city of Baiji, is the biggest producer of refined fuel for Iraqâ€™s domestic markets. The attack doesnâ€™t affect production or exports from the countryâ€™s main oil fields and facilities in the south. The attack, however, underlined concerns over the situation in the country.
â€œThe refinery, which supplies Baghdad with gasoline and diesel, shows that the situation in Iraq is not getting better,â€ said Phil Flynn, senior market analyst at Price Futures Group. â€œOil companies are pulling out nonessential personnel even in the south of the country … Oil companies are trying to export while the exporting is good yet the possibility of an oil shock is rising [if] the south of Iraq starts to fall.â€ See: Why traders may be overconfident about Iraqâ€™s oil exports .
Parts of the oil refinery were in flames Wednesday, according to Iraqi security officials.
Citing an official at the refinery, Reuters reported Sunni militants have 75% of the refinery under their control in an attack that came overnight. A British security company helped get Western workers out of the refinery just ahead of it. Meanwhile, CNN reported militants have made big advances toward Baquba, which is less than 40 miles north of Baghdad.
Sunni militants have reportedly attacked Iraq’s largest oil refinery, located in Baiji in northern Iraq, with machine-gun fire and mortars.
President Barack Obama will convene with congressional leaders on Wednesday, but has ruled out immediate airstrikes for now.
Meanwhile, the International Energy Agency said Tuesday it now expects Iraqâ€™s oil output to grow by only 1.3 million barrels per day to 4.5 million barrels per day by 2019.
â€œThis would give rise to a production level only roughly half as high as that targeted by the Iraqi government. The IEA previously also envisaged more marked growth in Iraqi oil production,â€ said analysts at Commerzbank in a note.
Iraq is expected to account for 60% of the output increase by the Organization of the Petroleum Exporting Countries by 2019. The missing supply, said the analysts, will need to come from other countries, and in the longer term, this points to higher oil prices. Read: The real reason oil traders worry about Iraq.
All markets will be keeping a close watch on the outcome of the Federal Open Market Committee meeting on Wednesday, with a statement and economic forecasts as well as a press conference from Chairwoman Janet Yellen to come. Also read: Five questions in search of answers from the Fed
Oil drew some support from news from the American Petroleum Institute, which on Tuesday reported U.S. crude-oil inventories fell a larger-than-expected 5.7 million barrels in the week ended Friday. The more closely watched weekly data from the U.S. Energy Information Administration was due for release Wednesday morning.