London: Brent crude slipped below $114 a barrel on Wednesday as the risk of supply disruption in Iraq appeared to recede and after a rise in U.S. inventories pointed to ample stockpiles for the world`s biggest oil consumer.
Oil has made sharp gains in the past two weeks as concerns over fighting in Iraq, OPEC`s second-largest producer and exporter, pushed the North Sea benchmark above $115, its highest since September.
But with exports from Iraq`s southern terminals running near record levels and most of the country`s oilfields in the peaceful south, far away from the Sunni insurgency, worries about supply have been easing.
Brent dropped 60 cents to $113.86 a barrel by 0755 GMT, after gaining 34 cents on Tuesday. Prices, up almost 6 percent over the past two weeks, have receded from a nine-month top of $115.71 reached on June 19.
"The risk of losing some Iraqi oil production is not zero, but it is very low, 5-10 percent, I think," said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.
"But the tail risk will keep oil prices elevated for now. Hence, I expect Brent to stay above $110 for the time being."
Sunni insurgents are battling government forces for control of Iraq`s biggest refinery - the 300,000-barrels-per-day Baiji complex - that has been under threat for nearly two weeks since militants overran northern cities.
"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 Phillip Futures.
U.S. crude climbed 20 cents to $106.23 a barrel. 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 in the previous session. Analysts say allowing more U.S. oil to be exported could help tighten the domestic market, pushing up prices. U.S. 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 exports.
News of a rise in U.S. crude oil and gasoline stocks helped drag oil prices lower.
U.S. crude inventories rose by 4 million barrels in the week to June 20, to 382.6 million barrels, compared with analysts` expectations for a decrease of 1.6 million barrels, data from the American Petroleum Institute showed on Tuesday.
Crude stocks at the Cushing, Oklahoma, delivery hub rose by 424,000 barrels, the API said.
The U.S. government`s Energy Information Administration (EIA) releases its data for the week ended June 20 later on Wednesday.