Crude records year’s biggest weekly gain on Iraq unrest

West Texas Intermediate and Brent crudes charted the biggest weekly gains this year as Islamist fighters extended their advance in Iraq, triggering concern of a return to civil war.

Futures in New York climbed 4.1 percent last week week while they added 4.4 percent in London. Government forces in Iraq, OPEC’s second-biggest oil producer, are seeking to dislodge Islamist militants from cities north of Baghdad after they overran army positions in Mosul. U.S. President Barack Obama said he won’t rule out using airstrikes to help the government.

“Prices have jumped to nine-month highs as the upsurge of violence in Iraq has raised additional risk of supply disruption,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The situation in Iraq is going to continue to guide the market for a while.”

WTI for July delivery rose 38 cents, or 0.4 percent, to settle at $106.91 a barrel on the New York Mercantile Exchange. The volume of all futures traded was 42 percent higher than the 100-day average.

Brent for July settlement, increased 39 cents to $113.41 a barrel on the London-based ICE Futures Europe exchange. The August contract climbed 4 cents to $112.46. Volumes were 48 percent above the 100-day average.

The European benchmark oil traded at a $6.50 premium to WTI, compared with $6.49 at Friday’s close.

“The situation in Iraq changed so rapidly this week,” said Sarah Emerson, managing principal of ESAI Energy Inc. in Wakefield, Massachusetts. “Mosul fell one day and the next day the militants were marching on Baghdad.”

The Islamic State in Iraq and the Levant, known as ISIL, forced a halt to repairs at the main pipeline from the Kirkuk oil field to the Mediterranean port of Ceyhan in Turkey when it overran Mosul. There were conflicting reports that Baiji, the site of Iraq’s biggest refinery, had been captured.

Prime Minister Nouri al-Maliki’s Shiite-led government is struggling to retain control of Sunni-majority regions after his army units in northern Iraq collapsed amid the extremist advance.

Iraq produced 3.3 million barrels a day of crude last month, data compiled by Bloomberg show. The country’s crude output capacity will increase by more than 1.2 million barrels a day in the six years through 2019, the International Energy Administration projected in its monthly oil market report.