Source AP ©

Oil prices climb above USD 66 a barrel on worries over Turkish push into Iraq

Oil prices rose Thursday as reports of a Turkish military incursion into northern Iraq raised concerns about possible disruptions to Iraqi oil exports.

"Any kind of conflict in this region that can potentially upset oil supply is going to boost prices a little bit," said Tobin Gorey, commodity strategist with the Commonwealth Bank of Australia in Sydney. "It probably won't turn into something huge, but you can't run the risk that it does."

Light, sweet crude for July delivery rose 10 cents to US$66.06 a barrel in Asian electronic trading on the New York Mercantile Exchange midmorning in Singapore. The contract on Wednesday rose 35 cents to settle at $65.96 a barrel.

Hundreds of Turkish troops crossed into northern Iraq Wednesday in pursuit of Kurdish guerrillas who raid Turkey from hideouts there, according to Turkish security officials and an Iraqi Kurdish official.

Traders were concerned that a Turkish invasion could disrupt already-curtailed Iraqi oil exports.

Also supporting oil futures were worries over Cyclone Gonu's approach toward the Strait of Hormuz, the world's most important crude oil tanker route. About one-fifth of the world's oil passes through the narrow waterway at the entrance to the Persian Gulf.

The storm weakened slightly after battering Oman's coast and was expected to make landfall on the southeastern Iranian coast late Thursday, but it was likely to spare Iran's offshore oil installations that lie more than 120 miles to the west.

Gonu caused little damage to Oman's relatively small oil fields. But raging seas prevented tankers from sailing from Omani ports, effectively shutting down the country's oil exports, authorities said.

In related news, U.S. gasoline inventories jumped by 3.5 million barrels in the week ended June 1, according to the Energy Information Administration's weekly inventory report, beating estimates. Analysts polled by Dow Jones Newswires had expected a 1.5 million barrel increase.

Crude inventories rose by 100,000 barrels, in line with expectations. But refinery utilization fell by 1.5 percent to 89.6 percent. Analysts had expected a 0.6 percent increase.

Inventories of distillate fuels, which include heating oil and diesel, rose by 1.9 million barrels per day. Analysts forecast distillate stocks to grow by 800,000 barrels.

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