Oil prices held firm above $71 a barrel on Thursday, nearing their highest in nine months after a raid by Turkish troops into northern Iraq revived Middle East geopolitical jitters. Data showing US refiners were struggling to boost summer fuel production and Cyclone Gonu's disruption of Omani oil and gas exports lent additional support to the market, keeping Brent crude within a dollar of late May's $71.80 high.
London Brent crude was up 8 cents at $71.10 a barrel after rising 57 cents on Wednesday, a fifth day of gains. US crude nudged up 6 cents to $66.02. Turkey denied a report on Wednesday it had launched a major incursion into northern Iraq to crush Kurdish rebels, but a military source said troops had conducted a limited raid across the mountainous border, rattling markets.
"It's easy to think it can turn into a longer and nastier (conflict)," said Tobin Gored, a commodity strategist at Commonwealth Bank of Australia. Anger is mounting in Turkey over the activity of Turkish Kurdish rebels using the mountains of northern Iraq as a refuge.
Northern Iraq is rich in oil, although exports via a pipeline through Turkey have been effectively halted for three years. Weekly US inventory data showing a surprise drop in refinery utilisation rates last week added to gains, overshadowing an unseasonably large 3.5 million barrel build in gasoline stocks thanks to a surge in imports.
With gasoline stocks still in a near 10-million-barrel deficit compared to their normal levels and refiners utilisation falling to below 90 percent, the weakest June level in 15 years, traders remained anxious over driving season supplies.
In the Middle East, Cyclone Gonna, the strongest storm to reach Oman in 30 years, disrupted the Mina al-Fatal terminal for a second day, halting exports of 650,000 barrels per day (bpd) of crude.
But the storm weakened as it moved toward Iran on Thursday. Adding to the sense of supply unease already heightened by Nigerian outages and Iran's nuclear drive, Brazilian oil workers are threatening a five day strike that could affect the country's over two million barrels per day (bpd) of production.