Singapore: Brent crude inched lower on Wednesday, but held close to a nine-month high above $114 a barrel as Sunni insurgents battled government forces for control of Iraq`s biggest refinery.
The 300,000 barrel per day Baiji complex, 200 km (120 miles) north of Baghdad, has been fought over since last Wednesday with sudden reversals on both sides.
But a lack of fresh threats to output from OPEC`s second largest oil producer curbed prices.
"Markets have already factored in the Iraq situation - unless something more chaotic happens. The threat of supply disruptions is receding," said Avtar Sandu, senior commodities manager at Singapore's Phillip Futures.
Brent crude for August delivery had fallen 17 cents to $114.29 by 0407 GMT, after gaining 34 cents to close at $114.46 the session before.
U.S. crude climbed 67 cents to $106.70. It hit $107.50 in early Asian trade after federal officials approved exports of condensate, an ultra-light oil, in a marginal relaxation of a 40-year ban on U.S. oil exports.
U.S. crude closed down 14 cents at $106.03 in the previous session.
Officials have told energy companies they can export a variety of condensate if it has been minimally refined, a U.S. Commerce Department spokesman confirmed to Reuters, although he said there had been "no change in policy" towards crude oil exports.
The Wall Street Journal reported that the Department of Commerce, which has come under growing pressure to ease restrictions amid a resurgence in domestic production, had given approval via a private ruling to Pioneer Natural Resources Co and Enterprise Product Partners LP to export the so-called condensate.
Expectations of a fall in U.S. crude oil inventories last week also buoyed the price of West Texas Intermediate, said Michael McCarthy, chief market strategist at Sydney's CMC Markets.
Analysts are expecting a fall in U.S. commercial crude oil inventories as refineries boosted output when the U.S. Department of Energy's Energy Information Administration (EIA) releases its inventory data for the week ending June 20 later on Wednesday.
Crude oil stocks are forecast to have decreased 1.6 million barrels on average, according to Reuters poll of analysts on Tuesday.
But the fall in inventories could be larger than expected due to more refining output, McCarthy said and forecast the drawdown could be as high as 3-4 million barrels.
Meanwhile, OPEC Secretary General Abdullah al-Badri said on Tuesday that there was no shortage of oil in the market and that the current Brent price is due to market nervousness over Iraq. OECD commercial stocks stood at 57.5 days of forward demand, he added.
Investors are also eyeing the situation in Ukraine after Russia renounced a mandate to send troops into the country and Russian President Vladimir Putin said "a substantive discussion" must follow a seven-day ceasefire to resolve the crisis.
First Published: Wednesday, June 25, 2014, 10:42