The price of oil jumped Thursday as an insurgency in Iraq raised the risk of disruptions to supplies at a time when other major oil-producing countries are already pumping near capacity.
The al-Qaida-inspired group that captured two key cities in Iraq earlier this week vowed Thursday to march on to Baghdad.
One of those two cities, Mosul, lies in an area that is a major gateway for Iraqi oil. While the loss of the city has no immediate effect on oil exports, now at over 3 million barrels a day, it adds to concerns over security and the country's plans to expand oil production.
West Texas Intermediate, the benchmark U.S. oil, rose $2.13, or 2 percent, to close at $106.53 a barrel on the New York Mercantile Exchange. Brent crude, a benchmark for international oils, rose more sharply, gaining $3.07, or 2.8 percent, to $113.02 a barrel on the ICE Futures exchange in London.
Analysts say the uncertainty of the situation in Iraq raises the chance of further increases in oil prices.
"Because we view a quick resolution to the Iraqi turmoil as highly unlikely with the situation more apt toward deterioration than improvement, we expect additional price gains, with WTI pushing up into the $110-112 zone while Brent potentially advances to as high as $117-$119," wrote Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, in a note to clients.